Metals net speculative positioning is extremely long – Goldman Sachs

Research Team at Goldman Sachs, suggests that using LME data through November 4 (copper prices trading at $4,970/t) and Comex data through November 8 (Copper price trading $5,220/t), well below current price levels of $5,550/t, net speculative length was already at extremely high levels.

Key Quotes

“We estimate that copper net speculative positions on the LME and Comex were already 1.78mt of copper, their highest position in well over a decade (since 2005). Indeed, it is possible that net LME and Comex copper length is now at record highs (in lots) given the price has rallied further in recent days.”

“Historically, net speculative positions have had a strong correlation with our China copper end-use demand indicator. As such, the positioning data suggests the market is positioned for a significant (further) pick-up in Chinese and/or global metals demand growth at current prices. This suggests that the bar for further upside in prices is getting higher (by the day).” 

“In terms of dollar notional positioning, net speculative length in the main base metals as of November 4 was >$24 bn, from near zero in January 2016, around levels not seen since before the oil price collapse in 3Q14. Over the medium term, it is certainly possible that a rotation into metals continues, with asset allocations buying into the demand and reflation thematic; however, a lot of buying has been done to date.”