An exchange traded fund that invests in coal-related stocks rallied over 3% on Tuesday, one day after Goldman Sachs (NYSE: GS) upgraded its outlook on the U.S. coal sector.

Market Vectors Coal (NYSEArca: KOL) jumped 3.4% and traded higher with the overall market Tuesday.

Goldman Sachs this week raised its outlook on the U.S. coal sector, as thermal coal prices get a boost from overall higher prices and renewed interest from countries as an alternative to power generation away from nuclear. Shares of Patriot Coal (NYSE: PCX) and Peabody Energy (NYSE: BTU) both gained, reports Market Watch. [Coal ETFs Stuck in Trading Range.]

“We expect recent increases in thermal exports and lower production levels to persist, leading to near-normal thermal coal inventories by year’s end and forcing domestic utilities to sign base load contracts for 2012 at prices above mid-cycle,” Goldman analysts said. “We expect higher oil prices to support higher international coal prices and improved energy investor sentiment.”

Goldman analyst Andre Benjamin raised the rating on coal from neutral to attractive, and the thermal coal price target for the next couple of years is at $75 per ton. [Coal, Miner ETFs Look to Massey Energy.]

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