Gold’s Less-Shiny Cousin – Copper – Could Sparkle This Year

Gold’s Less-Shiny Cousin – Copper – Could Sparkle This Year
Theodora Lee Joseph, CFA

27 days ago2 mins

Copper isn’t as glamorous as gold, but it’s definitely not dull when it comes to investment potential. In fact, analysts at Goldman Sachs are pretty dazzled by the orangish metal, predicting this could be its brightest year since 2021. Here’s why they’re so enamored:

Tight supplies. There just doesn’t seem to be enough of the stuff. Recent disruptions and setbacks in major copper-producing countries like Panama and Peru have drastically cut the expected growth in copper supply for 2024. The supply growth forecast has plummeted by 60% in the past six months. That means less copper is making its way to the market, creating a classic case of limited supply.

Strong demand. Despite the global economic seesaw, appetite for copper hasn’t dimmed. Even with China’s economy slowing down, its green energy sector and property development helped drive a 7.1% surge in demand for the metal in 2023. And this year, the appetite for copper is expected to grow by another 2.5%, as China commits to upgrading its rural grid networks. And there’s further upside to demand should China’s economy recover faster than anticipated.

Interest rate cuts. High interest rates have put a lot of pressure on the metals market across the developed world, shrinking physical demand and creating challenges for capital-intensive industries like mining. But this story could have a silver lining. If the US economy stays relatively stable and the country sees a sharp decrease in interest rates, copper could be back in vogue. Historically, when the Federal Reserve has cut rates without the economy being in the midst of a recession, copper prices have surged by an average of 13% in the 75 days following the initial rate drop.

One of the most direct ways to invest in copper is to buy stocks in the mining companies that pull it out of the ground. But you should bear in mind that plenty of factors other than the metal’s price can influence those companies’ share prices (its financial or operational results, for example). Another way to invest is via the United States Copper Index ETF (ticker: CPER; expense ratio: 0.97%) or via WisdomTree Copper (COPA; 0.49%).

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Disclaimer: These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment advisor.

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