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Goldman Sachs On CLP/Copper

CHILE
  • Moves in copper continue to be striking – since Covid crisis nadir roughly one year ago, prices have more than doubled. While prices have rapidly approached Goldman's team forecasts, there is still room for further increases, a further 10 to their 12-month forecast and 50% to the team's 2025 target of $15,000/ton.
  • Long CLP continues to scan as the cleanest expression of copper upside across a wide range of EM assets.
  • The continued attempts to meaningfully break 700 level in USDCLP represents important tactical CLP headwinds. These include heavy offshore positioning and the potential for domestic volatility in the run-up to Chile's Constitutional Convention election in mid-May. These headwinds must be factored in.
  • However, over the medium run, GS believe macro forces should be enough to eventually push USD/CLP sustainably below 700: another leg higher in the price of copper, aided by continued progress on Chile's vaccine rollout and an eventual hiking cycle, should support their 12-month USD/CLP forecast of 650, as well as their trade recommendation to be long CLP versus a roughly TWI-weighted basket.
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