Goldman (NYSE:GS) Prefers Copper Among Base Metals

Saying they see most base metals as being close to fully priced, Goldman Sachs (NYSE:GS) noted copper is the one base metal they see continuing to rise in price.

Their assertion in both cases are the supply and demand equation at this time, which appears to have plenty of product for the market in the near term, with the exception of copper.

Talking the nickel rally they see it more of a price spike than anything else, citing the low supply and demand challenges it faced. They see it as a price spike, saying the rally happened too quickly in relationship to the shortage. “We continue to believe that further upside is unlikely beyond the very short-term, and medium-term risk is still heavily skewed to the downside,” Goldman concluded.

On copper prices Goldman said, “Although historical information on global producer, consumer, and trader inventories is imprecise, the data and estimates we do have suggests that there is still metal to be destocked as prices drive higher. We believe the highest historical breakout of prices and timespreads occurred when stocks moved down to around 9-10 days of consumption post-SRB sales in 2005/2006.”

They concluded, “We continue to recommend copper consumers aggressively protect price risk. We also recommend zinc consumers lock in longer-dated hedges when periods of high macro volatility persist and zinc prices sell off.”

Freeport (NYSE:FCX) Goldman's (NYSE:GS) Best Way to Play Gold, Copper

Goldman Sachs (NYSE:GS) raised their gold and copper price projections for 2011, and chose Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX) as the best way to play the two.

For copper, Goldman raised their price projection for 2011 from $3.50 to $4.25 and for 2012 from $3.75 to $4.15.

For gold they raised their price projection for 2011 from $1,325 to $1,575 an ounce and for 2012 from $1,200 to $1,575 an ounce.

Also raised was their coal and zinc estimates, with coal increased to $229 for 2011 and $214 for 2012. Zinc was raised to $1.17 for 2011 and $1.10 for 2012.

Freeport-McMoRan Copper & Gold Inc. was trading at $116.35, up $0.15, or 0.13 percent, as of 11:45 AM EST.