The price of copper has a special (read: strategic) meaning in the context of markets. It is associated with the state of the economy, acting as a barometer of economic strength, hence its alias “Dr. Copper.” What is our copper price forecast for 2017? That is a great question, but not an easy one to answer.
Intuitively, one would say that copper would go lower in 2017, with so many unknowns and problems in the world. Think of geopolitical tensions, hardly an economic growth in developed markets, declining employment participation rates, and the likes.
Financial institutions and media have a slightly consistent view as their 2017 forecasts are neutral to bearish:
- Goldman Sachs believes that copper prices will slightly fall to $1.80
- This copper price forecast is very bearish
- Bank of Merrill Lynch sees lower copper prices in 2017
- Morningstar expects copper prices to stabilize around $2
In other words, most analysts are not very bullish on copper.
Our copper price forecast for 2017
As always, we rely on charts for our forecasts. We believe the very long term copper chart is helpful to answer above question.
Though copper tends to move in a very volatile way, we consistently see that copper prices have historically traded above or below $1.60. Until 2004, copper was trading below that price level, while that changed after 2004.
In 2017, we believe that the price of copper can do two things:
- Fall towards the $1.60 level.
- Rise from here onwards.
The line in the sand is the rising trend line which comes in at $2.10 currently (it will be at $2.25 in the summer of 2017). In other words, as long as the copper price remains above that trend line, we believe the price of copper will go higher or stabilize in 2017. However, as soon as that trend line is broken, the copper price will fall towards the $1.60 area.
Update on our copper price forecast
** Update in the last week of December **
IF copper breaks out, above $2.60 as shown on the next chart, then the copper market will go ballistic. The copper market is known to be very aggressive once it starts trending. It goes much higher and lower in a short period of time. Copper miners like FCX must be in your portfolio once copper breaks out.