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Investing.com -- UBS analysts have provided insights into the potential trajectory of copper prices, suggesting that a temporary dip to $8,000 per metric ton could occur, echoing historical patterns where prices have fallen roughly 25-30% from a 12-month peak.
Despite an increase in speculative long positions at the London Metal Exchange (LME), with net long positions rising by 45,600 contracts since the beginning of the year, UBS anticipates that any pullback in copper prices is not expected to be long-lasting.
The firm cites several factors that could support copper prices in the near future. Among these is the anticipation of more accommodative monetary policy globally, with expectations that the Federal Reserve will cut rates to counteract a growth slowdown and bolster asset prices. Additionally, further policy stimulus from China is likely, which would also be a positive factor for copper.
UBS also points to supply-side challenges that are expected to persist in the short term, which should contribute to higher prices to encourage investment in mine supply capacity. This outlook takes into account the potential for greater stimulus measures and the current supply dynamics.
In terms of investment strategy, UBS has favored selling volatility as a strategy for copper, particularly focusing on price downside risks to generate yield. This approach was preferred even ahead of tariff announcements by President Trump back in 2025. Although an outright long position in copper was attractive in the first quarter, the recent sharp price pullback has led UBS to continue recommending volatility-selling as an attractive exposure to copper.
UBS is confident in deploying strategies that involve selling downside risks, with a preference for a range between $8,850 and $9,150 per metric ton. The firm suggests holding these positions until maturity, despite the increasing macroeconomic uncertainty.
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