In a striking turn of events, a significant miscalculation by one of the financial world’s most influential institutions, Goldman Sachs, recently sent ripples through the global copper market, leaving some clients and trading desks nursing substantial losses.

Just a day before a pivotal announcement by then-US President Donald Trump regarding tariffs, Goldman Sachs’s sales teams were actively advising hedge fund clients to strategically bet on a considerable surge in US copper prices.

Their rationale was rooted in an expectation that Trump would proceed with a full 50% tariff on copper, prompting recommendations to acquire short-dated call options designed to yield profits if US copper prices climbed by approximately 11%.

However, the anticipated scenario dramatically diverged from reality when the US president imposed only a limited tariff, notably exempting the primary traded form of copper from any duties, leading to an unprecedented and sharp decline in prices in New York.

This significant misstep underscored how comprehensively the tariff decision caught the entire copper market off guard, resulting in substantial financial setbacks for several prominent hedge funds and the trading desks of major banks, including Goldman Sachs itself.

Other leading financial institutions were similarly unprepared for the outcome, with some, like Citigroup, having communicated optimistic outlooks to their clients regarding copper market arbitrage shortly before the unexpected price collapse.

This particular recommendation from Goldman Sachs was not an isolated incident; it was part of a series of advisories encouraging clients to capitalize on projected increases in US copper prices, particularly after an earlier July announcement of a 50% tariff prospect, which had already caused some market adjustments.

Specifically, Goldman had advocated for clients to purchase September call options with a $6.25 strike price, representing an 11% premium over the prevailing market rate, options whose value plummeted by over 90% following the unforeseen tariff announcement and subsequent market downturn.

It is important to note that these direct communications from salespeople were distinct from the research notes published by Goldman’s analytical team, who, while also predicting 50% tariffs, had more cautiously advised profit-taking on earlier trade recommendations due to potential “minerals diplomacy” and exemptions.