Copper Price► Copper prices have begun a moderate price correction. Savvy investors will take full advantage of the dip to fortify their holdings. At times like this, it is essential to ignore what the foolish analysts have to say about the price of copper. They know nothing. What further proof could there be of their ignorance than this recent NYT article, where one of these “analysts” was forecasting a 40% drop from the then prevailing copper price of $1.85, down to a price of $1.11, in 2006.
By Heather Timmons The New York Times
TUESDAY, NOVEMBER 1, 2005
LONDON Copper has doubled in price since 2003 and is up 40 percent this year alone, thanks to the housing boom in the United States and increased demand from China and India. But after hitting record highs two weeks ago, copper prices have bounced wildly in recent trading, kindling fears that a commodity price bubble is about to burst - even as mainstream investors keep piling into the markets.
Copper prices "will fall at least 25 percent by the end of the year," said Maqsood Ahmed, a senior metals analyst at Calyon Global Trading in London. Speculative buyers have pumped copper up beyond what the fundamentals justify, he said.
When copper prices start to fall, "it could be a dramatic affair rather than a slow burn," added Nick Moore, director of global commodity analysis at ABN AMRO. He predicted that prices would drop 40 percent in 2006.
The stage was set for copper's substantial price increase several years ago, when prices were low and producers stopped investing money in new exploration and production. Most copper producers only recently began to reinvest, and inventories have shrunk to their lowest level in decades.
Meanwhile, new inflows of capital in the market from investors like hedge funds and pension funds, which often make bets that the market's current momentum will continue, have exacerbated price increases.
On Oct. 20, prices reached a high above $4,000 a metric ton for three-month contracts, the London benchmark, on the back of mining strikes and inventory worries. A period of increasingly jumpy markets has followed, eating away some of those gains immediately. Inventory supplies have started to creep up, and predictions for 2006 growth in China are slowing.
On Monday, it finished at $4,069 per ton in contract for November delivery.