Just over 20 exchange traded products hit new 52-week lows. Unfortunately for commodities, plenty of those offending ETFs were commodities funds, including the iPath Dow Jones-UBS Copper Subindex Total Return ETN (NYSEArca: JJC), an exchange traded note.
JJC has shed 24% of its value year-to-date as slack demand for the red metal from China has prompted an array of global banks to pare their outlooks on copper. Goldman Sachs argues that the base metal is headed for a seven-year-long bear market cycle, reports Aza Wee Sile for CNBC.
“It is, in our view, highly likely that the four-year trend decline in copper prices is set to continue through at least 2018,” Goldman Sachs said in a note.
Consequently, the bank has cut its three-, six- and 12-month copper forecasts to $5,200, $4,800 and $4,800 per ton, respectively from $5,500, $5,550 and $5,200. In contrast, the industrial metal rallied to a high of over $10,000 metric ton in 2011 on huge demand from China’s housing boom.
However, Goldman warned that copper, which is exposed to macroeconomic headwinds, is currently exposed to diverging monetary policies, deflation and deleveraging in China, the largest consumer of copper.
Copper’s slide has also plagued the iShares MSCI Chile Capped ETF (NYSEArca: ECH). ECH, the lone ETF dedicated to tracking equities in the world’s largest copper-producing country. Although Chile is viewed by some market observers as the most advanced and open South American economy and it is undeniably home to Latin America’s highest sovereign credit rating (AA-), there is also no denying the country’s dependence on copper exports as a driver of government revenue. [A Chilly View on the Chile ETF]