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SPOTLIGHT: Do Goldman Sachs' calls drive copper prices?
May 26, 2011 - 00:00 GMT
Goldman's recent advisories on copper have called the market accurately... or have they driven it?
Correlation does not imply causation.
Yet those caught on the wrong side of Goldman Sachs' recent
base metals investment advice will surely be feeling that
the global investment bank holds more than a marginal influence
over the direction of the copper market.
The bank's recent announcements have caused shockwaves in the
metals market, and if the immediate price movements that
followed its statements are a reliable indicator, then Goldman
has been calling the market right.
The April 11 announcement that
Goldman had squared its copper book caused consternation
among many traders still involved in the long copper trade, and
the market slumped 6.6% over a six-day period as investors
liquidated their positions in the red metal.
Its October 6 announcement that
copper would hit $11,000 per tonne in 2011 was followed by
a less dramatic 2.5% increase, although copper was already at
27-month high at this point.
Goldman is now back in the long
copper game and the market rallied 3.1% in the two days
that followed, but it remains to be seen whether the flagship
base metal will return to the form of late 2010, as Goldman
believes it will.
Whichever way they are betting, in addition to currencies,
production figures, macroeconomics, China, interest rates and
the direction of the wind, some traders are clearly paying
attention to how the investment bank is calling the market.
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