Did I just agree with Goldman Sachs? It's time to position in copper, folks!

Inflation is proving tougher to tame than the Fed would like which means higher rates for longer than the market would like. This despite the overall indices near all-time highs.

The result is a dollar index at the 105 level, Bitcoin near the $50,000 mark, gold and silver threatening to close below the $2,000 and $22 mark, respectively, and a slumping copper price. More on copper in a bit.

It’s not all doom and gloom however. Lithium appears to be putting in a firm bottom. Uranium looks poised to continue its move higher, and recent production misses from several big names in the space have made $100 uranium the new floor with $200 uranium seeming more and more likely by the day.

We were fortunate enough to position ahead of both legs higher over the past year and a half, which brings me back to that slumping copper price and the opportunity it presents.

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Goldman Sachs, which I dislike agreeing with, recently noted that the copper market will be in a 428kt deficit distributed throughout the year, between a modest 269kt seasonal surplus in Q1 and a 696kt deficit over Q2-Q4. The market has suffered from supply shock over the past quarter from a series of mine supply downgrades tightening the concentrate supply.

In other words, the first half of the year is likely the last time you’ll see copper with a three handle. It’s worth noting that China recently loosened lending standards and has pledged to spend aggressively to offset a real estate and stock market crisis that has many questioning official economic policy.

There’s also a strong likelihood that China increases its quota for government “special” bonds that it uses mostly to fund infrastructure.

Chin new three industries growth chart.JPG

And the demand isn’t just coming from infrastructure. China installed more solar panels in 2023 than any other nation has ever built.

We’re going to need more copper over the next 30 years than we’ve ever mined at a time where discoveries are fewer, ore grade is lower, and jurisdictional risk is as high as it has been in quite some time.

Despite the bullish setup in gold and copper, there is very little speculative capital coming into the sector, especially in the junior space. Great for accumulating at bargain prices; not so great if you need to raise capital.

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That will change but we’ll need new all-time highs in the gold price and a supply shock in the copper space to get funds and retail back in the game. I suspect that will happen in the second half of this year.

Which is why you should be positioning right now

Let’s get it!

Gerardo Del Real

Gerardo Del Real
Editor, Daily Profit Cycle