Slower growth weighs on base metals but constructive for gold, CIBC says
The negative effects of trade disputes on global growth this year will push down demand for base metals and steel-making commodities, while the economic uncertainty will drive gold prices higher, CIBC says.
“CIBC economists are not forecasting a recession in 2019, but we expect increasing trade barriers and tariffs to slow down global growth over the next 18 months, delaying our previously forecast 2020 recovery to 2021,” the bank’s institutional equity research department writes in a research note.
Consequently, the bank’s analysts have trimmed their copper price forecasts for 2019 to US$2.75 per lb. (down 10.6%), and to US$2.85 per lb. (down 12.3%) in 2020. CIBC forecasts zinc prices of US$1.29 per lb. this year (down 9.6%), and US$1.35 per lb. in 2020 (down 3.9%).
“We acknowledge that a stronger-than-expected fiscal and monetary policy response from China, and/or supply disruptions (i.e., Chuquicamata in copper, Chinese smelting constraints in zinc), may support higher price estimates,” the analysts write. “However, a demand slowdown is likely to trump higher sustainable prices.”
By contrast, CIBC says, “the stage appears set in favour of precious metals for the year ahead, with trade war uncertainty weighing on global growth, lowered rate hike expectations, Brexit uncertainty, and constructive demand-supply fundamentals for gold and gold equities.”
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