As copper prices surge to record highs, Goldman Sachs warns that any further breakout may be a short-lived "bull trap," with an emotion-driven rally facing reversal risks.

On October 31, Goldman Sachs stated in its latest research report that copper prices have surpassed previous historical highs to reach $11,200 per ton, but this breakout is unsustainable. While current fundamentals support consolidation within the $10,000-$11,000 range, the 13% rally since mid-September has been primarily driven by investor sentiment rather than actual supply-demand tightness.

Analyst Eoin Dinsmore and his team noted that while LME investor positioning has reached an extreme 99th percentile over the past five years, COMEX open interest remains below its Q2 2024 peak, suggesting potential further short-term inflows that could temporarily push prices higher.

However, Goldman Sachs maintains that the market's anticipated supply tightness will not materialize in the next six months, with global visible inventories rising by 700 kilotons this year. The bank expects investors to unwind long positions in early 2026, driving prices back to the $10,000-$11,000 range, while maintaining its 2026 average price forecast of $10,500 per ton.

This aligns with Goldman's earlier framework establishing $10,000-$11,000 as a new trading range from 2026 onward, based on three core trends: supply constraints, structural demand growth, and strategic stockpiling.

**Rally Drivers: From Fundamentals to Sentiment** Goldman Sachs divides copper's 2024 rally into two distinct phases: 1. The first phase (January to mid-September) saw a 15% rise supported by fundamentals: a weaker dollar, improved China growth expectations, and tightening spot markets outside the U.S., evidenced by narrowing LME spreads. 2. The second phase (mid-September onward) delivered a 13% gain driven mainly by sentiment, as mine disruptions (notably Grasberg) and tightening expectations attracted speculative inflows.

Goldman's model shows early drivers were China growth, the dollar index, and LME spreads, while recent momentum has shifted to supply-side factors.

The bank notes that 2025's major disruptions—Kamoa-Kakula, El Teniente, and Grasberg—match the scale of 2023's Cobre Panama shutdown and Anglo American production cuts that triggered 2024's price surge. Estimated annual supply losses of 700 kilotons have only a net 200-kiloton impact on 2026's balance after accounting for disruption buffers.

**COMEX Positioning Suggests Short-Term Upside Risk** Despite stretched LME positioning, COMEX still has room for inflows, with total open interest at just 70% of 2024's peak. A potential "COMEX-LME price loop" (where high COMEX prices reopen U.S. import arbitrage, drawing inventories to America and deepening LME backwardation) could fuel further short-term gains, possibly breaching $11,200.

**Three Factors Supporting 2026 Reversal** Goldman expects sentiment-driven gains to reverse in early 2026 due to: 1. **Inventory Mismatch**: Global visible stocks rose 700 kilotons in 2025, implying a 400-kiloton surplus even after Grasberg disruptions. 2. **Demand Weakness**: China's apparent copper consumption fell 2% YoY in September, with downstream order softness and delayed grid projects. Cathode premiums have dropped sharply from May highs. 3. **Strong Refined Output**: Global refined production grew 4% in 2025, with Q4 output likely exceeding forecasts. Robust scrap exports and marginal producer supply offset weak mine growth in Chile.

Goldman concludes: "Without significant inventory draws outside the U.S. in the next six months, we expect speculative longs to unwind, pulling prices back to $10,000-$11,000 by H1 2026—even if near-term prices rise further."

This reinforces Goldman's strategic framework: $10,000 as the structural cost floor, and $11,000 as the ceiling where scrap supply and aluminum substitution kick in.