Mar. 30 (Bloomberg) - Copper traders are the most bearish in two months after stockpiles tracked by the biggest metals bourse rose for the first time in five weeks and Goldman Sachs Group Inc. cut its recommendation on commodities to neutral.

Eleven of 25 analysts surveyed by Bloomberg expect copper to drop next week, the highest proportion since Jan. 6. Seven were neutral. Inventories reported by the London Metal Exchange rose 1.4 percent on March 27, the first gain since Feb. 22. Reserves in Shanghai's bonded warehouses tripled since November and any strengthening in demand next quarter may be "tepid," Barclays Capital said in a report March 28.

China is the biggest copper buyer, using two in every five metric tons, and Premier Wen Jiabao cut the nation's growth target to 7.5 percent earlier this month, the lowest since 2004. Economists surveyed by Bloomberg anticipate a recession in Europe, which accounts for 18 percent of copper demand. That's outweighing signs of an accelerating U.S. expansion and paring this year's rally in prices of as much as 15 percent.

"There is a disconnect between the physical and economic evidence coming out of China and what's happening within the industrial metals," said Jeremy Baker, who helps manage $925 million of assets for the Belvista Commodity Fund, part of the Vontobel Group in Zurich. "The U.S. is improving, but the U.S. is still a very small proportion of a total consumption equation for metals. We need to have some kind of a shakeout."

Commodity Research
Copper fell 5.3 percent from this year's peak of $8,765 a ton on Feb. 9, paring its advance to 9.5 percent, as the LMEX index (MXWD) of six industrial metals dropped 6.8 percent. The Standard & Poor's GSCI gauge of 24 commodities climbed 6.2 percent since the start of January and the MSCI All-Country World Index (MXWD) of equities added 10 percent. Treasuries lost 1.2 percent, a Bank of America Corp. index shows.

Goldman's commodity research team, led by Jeffrey Currie in London, reduced its three-month recommendation on raw materials to neutral from overweight on March 28. Prices already reached the bank's targets and the economy will "soften" next quarter, they wrote in a report. The team expects copper to reach $8,400 in three months, 0.8 percent more than now. They advised clients to remain overweight in commodities over a 12-month period.

Traders in China now have as much as 650,000 tons in bonded warehouses in Shanghai, which are exempt from a value-added tax and import duties, from 200,000 tons in November, Barclays estimates. That coincided with a decline of about 46 percent in LME stockpiles since October, suggesting not all of the metal was actually consumed, bourse data show. Growth in Chinese copper demand will slow to 5 percent this year, from 9.5 percent in 2011, Barclays estimates.

Consecutive Quarters
European consumption will drop to 3.71 million tons in 2012, from 3.78 million tons last year, the bank predicts. The 17-nation euro economy will contract for three consecutive quarters through September, the median of 18 economist estimates compiled by Bloomberg show.

Prices rallied this year on prospects for shortages, with Barclays forecasting a deficit of 323,000 tons, more than the 255,625 tons left in LME-monitored warehouses. Mining companies have failed to keep up with global demand that jumped about 38 percent the past decade, according to Barclays.

Hedge funds and other money managers are getting more bullish, raising their bets on higher prices by 20 percent to 17,060 futures and options in the week ended March 20, Commodity Futures Trading Commission data show. That's the biggest so- called net-long position since August. Goldman's research team is forecasting a copper price of $9,000 in six months.

Economic Cooperation
Chinese growth of 7.5 percent would still be more than twice the anticipated expansion in the U.S., whose economy may gain 2.9 percent in the first quarter and 2.8 percent in the second, the Paris-based Organization for Economic Cooperation and Development said yesterday. North America accounts for 11 percent of copper demand, according to Barclays.

"For those willing to take a risk on Chinese growth, there is potential value in the base metals," said Nic Brown, head of commodities research at Natixis Commodity Markets Ltd. in London. "The market could be much tighter than people expect."

Nine of 18 traders and analysts surveyed by Bloomberg expect gold to gain next week and three were neutral. Futures on the Comex in New York increased 5.5 percent to $1,653.10 an ounce this year, for a 12th consecutive annual advance. Holdings in gold-backed exchange-traded products are within about 0.3 percent of the record 2,410.2 tons reached March 13, data compiled by Bloomberg show.

Ben S. Bernanke
Federal Reserve Chairman Ben S. Bernanke said March 26 that while he's encouraged by the decline in the unemployment rate, continued accommodative monetary policy will be needed. The central bank bought $2.3 trillion of debt in two rounds of quantitative easing that ended in June 2011, during which gold appreciated about 70 percent.

Growth is also being threatened by rising energy costs, with New York-traded crude oil advancing 37 percent to $103.36 a barrel since the start of October on mounting tensions over Iran, the second-biggest producer in the Organization of Petroleum Exporting Countries. Gasoline futures rose 39 percent to $3.3958 a gallon since Nov. 25.

Five of 10 people surveyed expect raw-sugar prices to decline next week. The commodity climbed 5.4 percent this year to 24.55 cents a pound on ICE Futures U.S. in New York.

Seventeen of 23 people surveyed anticipate higher corn prices next week and three were neutral, while 11 of 22 said soybeans will climb and eight predicted a decline. Corn dropped 5.4 percent to $6.115 a bushel this year as soybeans advanced 13 percent to $13.6325 a bushel.

"While the U.S. economy does appear stronger as of late, the specter of higher oil, and therefore gasoline, prices has been hanging over everything," said Mark Lewon, the president of Utah Metal Works Inc., a Salt Lake City-based company recycling industrial scrap. That "could easily slow down this part of the recovery."

Gold survey results: Bullish: 9 Bearish: 6 Hold: 3
Copper survey results: Bullish: 7 Bearish: 11 Hold: 7
Corn survey results: Bullish: 17 Bearish: 3 Hold: 3
Soybean survey results: Bullish: 11 Bearish: 8 Hold: 3
Raw sugar survey results: Bullish: 0 Bearish: 5 Hold: 5
White sugar survey results: Bullish: 0 Bearish: 6 Hold: 4
White sugar premium results: Widen: 1 Narrow: 2 Neutral: 7