Copper Gains for Fifth Day as U.S Housing Data Drives Optimism

SINGAPORE, Aug 5 -- Goldman Sachs suggested investors should take profits from a rally in copper, as it closed out a long deferred copper trade at a profit of 18 percent, but said it was itself looking to re-enter the trade.
&nbsp;&nbsp;&nbsp; &quot;Given our view that supply constraints will bind the fastest and hardest for copper, we believe that risks to our copper price forecasts are skewed to the upside,&quot; the broker told clients in a recent note.
&nbsp;&nbsp;&nbsp; In the metals basket trade, Goldman expects copper/zinc to outperform aluminium/nickel, fuelled by rising emerging market demand and less spare production capacity, it added.
&nbsp;&nbsp;&nbsp; &quot;Although this trade has underperformed largely owing to the investor demand for nickel as well as the ramp-up in U.S. auto production, we believe support from these factors will prove temporary given excess production capacity in these metals,&quot; it said in the note.
&nbsp;&nbsp;&nbsp; Recent volatility in base metals has been fed by uncertainty over the prospects of China tightening policy and its possible large stockpiles of the metal, Goldman added.
&nbsp;&nbsp;&nbsp; &quot;Strong Chinese imports and production of copper, aluminum and zinc are broadly consistent with the underlying strength in metals-intensive end-use sectors,&quot; it said.
&nbsp;&nbsp;&nbsp; Implied demand for nickel was out of line with fundamentals, Goldman said, based on its study of Chinese commodity demand indicators reflecting real end-use demand.
&nbsp;&nbsp;&nbsp; This was a potential reflection of strong investor appetite for the metal that is the easiest to store and has the highest $/MT value of all base metals, it added.
&nbsp;&nbsp;&nbsp; (Source: Reuters)