(Bloomberg) — Copper, often called “Dr. Copper” due to its correlation with the economic cycle, could be the trade of 2020, as most industry analysts expect a “lift-off” for the metal as global demand recovers.
Gold miners had a blockbuster year in 2019 owing to expectations of U.S. Federal Reserve rate cuts and as geopolitical tension mounted between the U.S.-China. But concern about dampened global demand as a result of trade threats left base metal miners limping into the new year.
But that might reverse next year thanks to improved demand, making copper “poised for liftoff,” according to Jefferies analyst Christopher LaFemina. Low copper inventories, high short positions, supply constraints and better demand are creating conditions for the metal to rally, he wrote in a note to clients.
Joining LaFemina in his optimism is Goldman Sach’s Jeffrey Currie, who thinks copper is “set to inflect” in 2020 due to strong growth out of China. Morgan Stanley, Bank of America and Citi also have positive expectations for copper and an improving global economy.
History shows that base metal miners have often caught up with gold equities after precious metals outperformed. The S&P/TSX Equal Weight Global Base Metals Index (TXBE) underperformed the S&P/TSX Equal Weight Global Gold Index (TXGE) in 2016, but caught up by the end of 2017.
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