The Chinese alarm is triggered, and Goldman cut its forecast for precious metals

Goldman Sachs lowered their short-term projections on precious metals, owing to a certain weakness in the Chinese economy. The bank expects the Chinese government to take the appropriate measures to stabilize and revive economic expansion in the second half of the year, which will lead to a rise in copper and aluminum prices.

Goldman, who has a constant bullish attitude to precious metals before entering the new year, now predicts the copper price could reach $ 6100 per metric ton in three months and $ 6400 in the next six. This is lower than their previous estimate of $ 6500 and $ 7000 respectively.

Given the political importance that economic growth has in China, politics needs to be loosened to prevent the negative effects of economic slowdown in many sectors of the economy. Infrastructure investments are expected to increase by 10% in 2019 from 4% in 2018, which will also lead to GDP growth on an annual basis.

Copper to zinc metals were severely hit in 2018 due to the tensions of the trade war and the rise in the US dollar. But the slowdown in China has been the main factor in lowering metal prices. Especially since China's production index declined further in December for the first time since 2016. And demand for precious metals from the largest economy in Asia has undoubtedly decreased dramatically.

Goldman analysts expect precious metals to remain under strong pressure in the first quarter of the year. Experience from such scenarios in 2015 and 2016 suggests that before taking secure long positions, investors would first want to see evidence that demand for metals will increase.

Goldman, for some of the metals, has a more slim look like copper, which is in a resale zone, and there are some supportive microeconomic moments in China, such as a tighter import of scrap that is ignored by the markets. Despite the downward trend in metals, the bank remains with a positive attitude to the fundamental aspect of things.

With nickel, Goldman has made a significant cut in its forecast, relying on weak supplies from Indonesia. According to the bank, nickel over the next 12 months could end at about $ 12,500 from $ 18,000.

Source: Bloomberg Finance L.P.

Graphs: Used with permission of Bloomberg Finance L.P.

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