Goldman all but says the mining supercycle is back

The LME index of base metals has climbed to the highest since 2014. Given its widespread use copper is considered a good barometer of the global economy – measured from its early January 2016 low the metal has added two-thirds in value.

Now Goldman Sachs says it’s only the beginning.

Analysts Jeffrey Currie and Michael Hinds at the New York investment bank believe “rising commodity prices will create a virtuous circle, improving the balance sheets of producers and lenders, and expanding credit in emerging markets that will, in turn, reinforce global economic growth”:

“The environment for investing in commodities is the best since 2004-2008,” they wrote in a research note.

Goldman sees copper enjoying double digit gains to top $8,000 a tonne ($3.63/lb) over the next 12 months. For copper that constitutes a 12% jump from today’s price. The last time copper traded at $8,000 was at the beginning of 2013.

The forecast establishes Goldman as one of the most bullish Wall Street banks. Citigroup sees copper averaging $7,125 a tonne this year and Deutsche Bank at $7,175, according to data compiled by Bloomberg.

On a longer term basis Goldman is also bullish about copper saying in a earlier report that “the markets where technology hasn’t substantially shortened the supply cycle, and where cost are rising, (i.e. copper) have the greatest long-term upside in prices.”

Biggest surprise from the new Goldman report is the price of iron ore which is expected to climb to $85 a tonne over the next three months, up 17% from the current level. The previous forecast from the bank was for the steelmaking ingredient to average just $55 over the period.

The forecast for metallurgical coal is only a slight improvement over the spot price – going from $215 to $220 a tonne, but is a full third higher than Goldman’s previous prediction of $165 a tonne.