Report: One day before the epic plunge of copper, Goldman Sachs advised clients to go long on copper, and its own trading was also affected
Trump did not impose tariffs on major copper products, surprising the market and Goldman Sachs, leading to a record 22% plunge in New York copper prices. Just the day before, Goldman Sachs had still advised clients to buy call options, betting that copper prices would surge due to a 50% tariff, stating that the price spread should widen to 35%-40%. As a result, Trump exempted copper's main products from tariffs, and New York copper prices plummeted 22%, marking the largest single-day drop since 1988. Goldman Sachs' sales team sent multiple emails of apology, as clients suffered heavy losses while their own trading department also incurred losses
According to media reports, sales personnel at Goldman Sachs advised hedge fund clients to bet on a significant rise in U.S. copper prices the day before President Trump announced his tariff policy, but this decision ultimately led to the largest drop in copper prices in history.
According to sources familiar with the matter, Goldman Sachs indicated during a client conference call on Tuesday that Trump was likely to push for a 50% tariff on copper and suggested clients purchase short-term options that would yield profits if U.S. copper prices rose by 11%.
However, in reality, Trump announced only a limited tariff measure on Wednesday afternoon, completely exempting copper from major trading forms, which caused New York copper prices to plummet by 22% within hours.
That evening, Goldman Sachs' commodity sales department sent an email to clients titled "No Copper Tariff. We Were Wrong (Mea Culpa)."
Media reports indicate that Goldman Sachs' misjudgment highlighted how nearly the entire copper market was caught off guard by this tariff announcement. Additionally, sources told the media that multiple hedge funds and bank trading departments, including Goldman Sachs, suffered losses during Wednesday's price crash. This drop was twice the largest historical drop recorded for U.S. copper contracts since 1988.
Other major banks were similarly caught off guard. Sales personnel at Citigroup also sent messages to clients on Wednesday morning stating, "Our trading department likes to do copper arbitrage (buy COMEX, sell LME)."
The value of the options suggested by Goldman Sachs has dropped by 90%
In fact, Goldman Sachs had previously advised clients to bet on price increases multiple times. As early as early July, Trump announced that the tariff on copper would be 50%, while market expectations were only 25%, but at that time, U.S. COMEX copper prices were only about 28% higher than the global copper price on the London Metal Exchange (LME).
Although some clients were concerned that tariffs might be exempted due to trade agreements with copper-producing countries like Indonesia, Goldman Sachs believed that the price difference between the U.S. and the global market would further widen. In the summary of the conference call sent to clients on Tuesday, Goldman Sachs wrote that a "full 50% tariff" should widen this price difference to 35% to 40%.
Goldman Sachs suggested clients purchase call options expiring in September with a strike price of $6.25—approximately 11% higher than the current price at that time. However, since the tariff announcement and the subsequent price crash, the value of these options has plummeted by over 90%.
At the same time, the metals analysts on Goldman Sachs' research team also predicted a 50% tariff, but in a report released on Monday, they stated that "mineral diplomacy" might lead to exemptions and suggested taking profits on their earlier recommended COMEX and LME arbitrage trades
