Commodity outlook
Gold: With inflationary pressures still evident in many economies and the Fed’s rate‑cut cycle still a few months away, gold is expected to hold above the $2,200‑$2,250 / oz range for the next 3‑6 months. The 200‑day moving average has become a new support level and the price is trading above the 50‑day EMA, giving the metal a modest bullish bias. Geopolitical risk (e.g., tensions in the Middle East) and a weaker US dollar also underpin a near‑term upside to $2,300 / oz, while a breach of $2,100 could trigger a short‑term correction.
Copper: Global supply constraints (limited new mines, ongoing labor disruptions in Chile and Peru) together with strong demand from electric‑vehicle battery production and infrastructure spending keep the price on an upward trajectory. The market is pricing copper around $5.30‑$5.45 / lb with the 200‑day SMA at $5.30 providing a key technical floor. A breakout above $5.55 would open the path to $5.80‑$6.00, while a break below $5.10 would raise the risk of a short‑term dip. Overall, a 5‑7 % price appreciation in the next quarter is a realistic baseline.
Implications for Hudbay (HBM)
Hudbay’s earnings are tightly coupled to the copper‑to‑gold price ratio because the bulk of its cash flow comes from copper (≈ 60 % of revenue) while gold provides a hedge against copper‑price volatility. The strong Q2 2025 results—driven by higher‑than‑expected copper production and a modest premium from gold—already reflect a favourable commodity backdrop. Assuming copper trades in the $5.30‑$5.45 / lb window and gold stays above $2,200 / oz, Hudbay’s operating margin should stay in the 13‑15 % range and earnings per share can comfortably meet the FY‑2025 guidance of $1.80‑$2.00. A further 5 % rise in copper would add roughly $0.10‑$0.15 to EPS, while a $50‑increase in gold adds another $0.05‑$0.07, pushing the company toward the upper‑end of its outlook.
Trading action
- Long Hudbay on any pull‑back to the $30‑$31 USD level (near the 50‑day SMA) with a 3‑month target of $34‑$36, reflecting the upside from copper’s near‑term rally.
- Protective hedge: use a 3‑month put spread at $29‑$30 to guard against a sudden metal‑price shock.
- Cross‑asset play: If copper breaks above $5.55 / lb, consider a long copper‑ETF (e.g., COPX) or a copper call option; the rally should lift Hudbay’s stock in tandem. Conversely, a drop below $5.10 suggests trimming exposure or tightening stop‑losses around $30‑$31 for Hudbay.
Overall, the metal‑price environment remains supportive, making Hudbay a relatively low‑risk, upside‑biased play for the next 4‑6 weeks.