A Copper Price Forecast For 2020 And 2021 *Corona Crash Update*

Our annual copper price forecast for 2020 is neutral to mildly bearish. Similarly, our copper price forecast for 2021 is neutral. We may expect a bullish turnaround in the copper market in 2022 or later, but it’s too early to tell. That’s why readers should follow our 2022 forecasts. We this copper prediction to our long list of commodities with a neutral 2020 forecast. Most commodities are neutral in 2020 and some might become bullish as per our 2021 forecasts. Note that all our forecasts are analyzed and written by InvestingHaven’s research team, not by other analysts, in a simple to understand forecasting framework.

[Corona Crash Update posted on March 27th 2020. Please scroll to the bottom to find the most up-to-date copper price chart as well as insights to our forecasts after the Black Thursday and Black Monday crashes in March of 2020.]

[Corona Crash Update posted on April 27th 2020. Please scroll to the bottom to find the most up-to-date copper price chart for April of 2020, and an updated forecast with price projections for the remainder of 2020.]

Introduction

As per Tsaklanos his 1/99 Investing Principles it is only 1% of the time that copper registers a bullish turnaround. For investors all that matters is when copper turns bullish. That’s because copper has a track record of rising aggressively, but it only does so if and when it breaks out.

Why This Copper Price Prediction?

We are on the lookout of markets that become a multi bagger in 6 to 9 months time. It is our official mission, formalized at the start of 2020. We call it our Mission 2026, and we even have a target for this: we want to turn $10k into $1M the latest in 2026 by having the best forecasts and associated trades.

When it comes to copper what we are really interested in is this to catch these major moves in the copper market if and when they occur.

We are talking the type of move that makes your copper investment a multi bagger in a few months. Copper has done this a few times, and it is the most important reason why we publish our copper price prediction for 2020 and beyond.

We want to catch those wildly bullish moves in the copper market.

However, the challenge is the timing of these moves. Getting in too early will be tough to hold, and getting in too late may end up with catastrophic results for your portfolio.

Based on the elements in this article we conclude that the likelihood of copper turning bullish in 2020 + 2021 is very low. Only if the price of copper breaks out convincingly above $2.75 and this breakout is supported by its leading indicators will be change our prediction!

Note that we expect some other markets to do much better in 2020 and 2021 that the copper market. We urge readers to check our other forecasts to find better opportunities:

Our Copper Price Forecast for 2020 and 2021

Let’s start with our conclusion. Readers who don’t want to understand our underlying forecasting method can ignore the rest of the article.

One major conclusion is that copper is in a mildly bearish trend right now. A trend is a trend until proven otherwise.

The leading indicators for the price of copper do not suggest a quick turnaround. Especially inflationary forces are not expected to rise significantly in 2020 or 2021, nor does the Euro trade at a point where it is expected to go up wildly. Those 2 indicators, and a strong rise in both, is what we need for a bullish copper price forecast for 2020 and 2021.

That said, the copper price chart suggests a continuation of its price to trade between $2.25 and $2.75.

Copper Price Forecast Summary for 2020 and 2021

Based on the leading indicators (or lack thereof) and more importantly the chart setup we see the following copper price forecast for 2020 and 2021.

Copper About To Exceed Our Forecast (edit: Jan 3d, 2020)

Ed. note: This is paragraph (only) was added on Januardy 3d, 2020.

As 2020 kicks off we see that copper is trying to turn bullish. This, presumably, comes with several base metals showing a bullish bias. Silver is very bullish right now. Steel is showing bullish signs.

However, the Euro trying to turn bullish along with the Australian Dollar is probably the biggest driver for commodities as 2020 kicks off. How exactly it will affect commodities, and at which pace, remains to be seen. But we want to keep a very close eye on these ‘events’.

More to come throughout the year. What we can see though is that market conditions are lining up to support commodities. More work is required especially in the copper market. If and when the tide turns, and our neutral copper forecast is invalidated because of a bullish trend, we will update followers on our blog.

Leading Indicators for our Copper Price Forecast

Interestingly, copper has a few reliable leading indicators which should be in line with expectations of commodities investors.

First there is global copper supply demand factors at play. This is a complex market, and China plays an important role here. It is a given that China’s market is often intransparent. That’s why we consider this a directional indicator.

Second inflationary vs deflationary forces play an important role in determining the future copper price direction. This is a directional indicator. In other words we have to look to the high level, multi year trend to understand if inflation is winning or deflation.

Last but not least the Euro is very strongly correlated to the copper price. We give this the highest weighing among the 3 leading indicators that determine our copper price forecast for 2020 and 2021.

With this we go against the forecast of Bernstein who predicts rising copper prices. We are fine with this, because the copper to gold ratio is not a leading indicator for the price of copper according to us.

Obviously we do not rely on copper market news. It confuses investors. Look at this bearish copper price article on the WSJ or negative on FT.com, while this one is much more bullish. Go figure.

Leading Indicator #1: Copper Supply Demand

Let’s start by a supply forecast in the physical copper market.

The International Copper Study Group published recently their copper supply forecast for 2020. They look at global copper mine production as well as usage.

We pick out a few highlights from their 2020 forecast.

After a growth of 2.5% in 2018, world mine production, after adjusting for historical disruption factors, is expected to grow by 1.9% in 2020:

• World mine production increased by 2.5% in 2018 principally due to constrained output in 2017 and to an unusually low rate of overall supply disruptions in 2018.
• In 2019, additional output in some mines is expected to be balanced by a significant decline in output elsewhere.
• In 2020, additional supply from ramp-up mines and expansions that started in 2019, together with a recovery in the declining output mentioned above will support growth of about 1.9%.

World refined copper balance projections indicate a deficit of about 190,000 and 250,000 tonnes for 2019 and 2020 respectively:

• ICSG recognizes that global market balances can vary from those projected owing to numerous factors that could alter projections for both production and usage namely the current US-China trade issues, strength of the global economy especially the Chinese. In this context it can be noted that actual market balance outcomes have on recent occasions deviated from ICSG market balance forecasts due to unforeseen developments.
• In developing its global market balance, ICSG uses an apparent demand calculation for China that does not take into account changes in unreported stocks. Apparent copper demand for China is based only on reported data and does not take into account changes in unreported stocks which can be significant during periods of stocking or de-stocking and which can markedly alter global supply-demand balances.
• Current ICSG projections are for a deficit of about 190,000 metric tonnes (t) in 2019, bigger than the deficit of 65,000 t foreseen at its October 2018 meeting. For 2020, the Group forecasts a higher deficit of about 250,000t as growth in refined production is expected to lag behind that of usage.

So the 2 really important figures we remember from the global copper supply demand forecast: world copper mine production is expected to grow by 1.9% in 2020 and a 3x higher deficit in 2020 compared to 2019.

This should be supportive for the copper price in 2020.

Leading Indicator #2: Inflation

The second leading indicator for our copper price forecast is inflation. More specifically it is inflationary vs deflationary forces, and how they play out in a trend!

For the inflationary vs deflationary forces we follow this one indicator which is Pring’s Inflation / Deflation index. It gives an indication of the ongoing trend. It gives a sense of the direction, and that’s the most useful way to use this.

That’s why the long term chart is the only one that matters. We look at the monthly chart over 20 years.

What becomes apparent is the major crash that started in 2014, and a major bottom in January of 2016. The strong bounce that followed throughout the first period of 2016 morphed into a decline.

In 2019 we see that this decline transitions into the start of a flat pattern. Is 2019 going to mark a major double bottom for the deflationary pressure? Likely yes, and that’s because many commodities are pretty weak right now.

The saying goes is that what is falling can always go lower. That’s true, but the probability of a stabilization in the inflation/deflation indicator is very high.

That’s why we forecast that this indicator is going to be neutral in 2020 and mildly bullish in 2021. This is supportive of neutral to higher prices in the commodities space.

Leading Indicator #3: The Euro

Last but not least: the Euro.

The next chart exhibits the correlation between the Euro and the price of copper. The copper price in light grey, the Euro with the black candlesticks.

We ask members to pay special attention to the green and light grey circles. They show major turning points of the Euro within its chart pattern (light green circles) and how it relates to major turning points in copper (light grey circles).

The correlation is clear: a rising Euro is supportive of copper prices.

We do forecast that the Euro will remain neutral to weak in 2020. Hence we do not expect copper to outperform.

Our forecast turns invalid as soon as the Euro starts rising strongly. We don’t see sufficient signs of this to happen in 2020, maybe in 2021.

Copper Chart and Price Targets

Let’s now combine the findings of our leading indicators with the observations on copper’s long term chart. We take the classic top-down approach. First the monthly copper price chart, then the weekly.

The monthly copper price chart over 30 (!) years reveals one, and only one thing that investors should know.

The price of copper tends to rise very fast once it is in a secular bullish trend. However, the number of turning points was just 4 in 30 years time. That’s why statistically we cannot be bullish for our copper price forecast 2020.

The 4 turning points are indicated on the chart. The ongoing falling channel is also clear on this chart. We expect copper to continue to move in 2020 in its channel between $2.25 to $2.70.

On the weekly timeframe we get a better picture of this ongoing decline. The $2.25 to $2.70 channel is shown in great detail.

Note that this $2.50 level is acting as great support since 2017. We do not exclude the possibility of copper to respect this $2.50 level. If this happens, and combined with a suddenly rising Euro and sudden improvement in the Inflation/Deflation indicator it might push copper prices significantly higher. Only if copper breaks out above $2.75 can we get bullish on copper!

Note that on the very long term copper chart we see this period the 70ies till the 90ies with one wide range, followed by a wide range in the last 2 decades. We expect the next decade to be in line with the similar pattern of the 80ies.

Corona Crash Update on March 27th, 2020

This paragraph and below charts contain an up-to-date version of the long and short term copper price charts. We wrote this update on March 27th, 2020, at the depth of the Corona crash.

First the 15 year copper price chart.

A very interesting pattern was created by the Corona crash sell off: a rounded formation (yellow half rounded pattern).

Presumably this week’s sell off to the 2 USD level marks the first half of the pattern. We can reasonably expect this pattern to mirror the first half. In other words this rounding formation might go on for another 2 years until it completes. In that time period it will be tough to expect copper to exceed 3.25 USD.

On the weekly chart, a close up of the one above, we see how the damage from this week touched an important support area: the 2016 reversal (also support back then).

As long as copper remains below the 2.20 USD level it is trying to recover from this fatal crash. Ultimately it may move back into this 2 year bear market channel.

Corona Crash Update on April 27th, 2020

This paragraph and below charts contain an up-to-date version of the long and medium term copper price charts. We wrote this update on April 27th, 2020, a month after the Corona crash lows.

The monthly copper price chart has now shown its intention: the Corona crash lows confirmed a giant reversal pattern that is in the making for 8 years!

This giant reversal is (1) bullish in nature (2) a long term pattern (3) marking the reversal of the long term bear market.

The price targets we see are pretty clear: the 3.30 USD target will be reached in the next 24 months. Once above 3.30 USD copper will be back in a bull market.

The medium term copper price chart shows this giant reversal in a close up. And the reversal has a really perfect setup. Look for instance how the crash lows of January 2016 and March 2020 work perfectly together to create this rounding formation.

Moreover, it looks like the correction that started in 2018 is now set to continue. Once above 2.70 USD there will be bullish momentum in the copper market, and it will be the start of the attempt for copper to move to 3.30 USD.

The first big resistance that will be challenging to overcome is 2.50 USD. Not easy to break through it, but once done we may see the start of momentum in the copper market.

Results of our previous Copper Predictions

Copper Forecast Log: Weekly updated throughout 2020

This is a (bi-)weekly log to keep track on our copper price forecast for 2020 and 2021. We update this on (bi-)weekly basis throughout 2020 with short bullet points to highlight whether the copper market in 2020 and 2021 is developing according to our copper price projection.

• First week of January: the copper market tried to break out. We saw sector strength in base metals, similarly in steel we also saw signs of strength as well as in the silver market (see our silver forecast). Much more work is required for copper to confirm its breakout, but it’s possible. The Euro should confirm its breakout as a minimum requirement.
• Second week of January: not so great start of the week for the price of copper. It fell back into its falling channel.
• Between mid-January and end of February copper was literally going nowhere. It was trading right above the median line of its falling channel.
• In March with the epic Corona crash copper fell to decade lows. It touched the 2015/2016 lows, which marked a decade long bottom.
• The recovery in April was pretty impressive.
• As May kicks off copper is back in its channel, at the lower side, almost ignoring the epic crash of March.

Detailed Follow Up on our Copper Forecast (free forecasting email newsletter)

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