Goldman cuts outlook for commodities amid prospects of weak demand in China and Europe

LONDON: Goldman Sachs cut its "near-term" outlook for commodities and reduced its forecasts for oil and coffee amid prospects for weak demand from China to Europe. The bank also exited a bet on lower gold prices.

Goldman Sachs lowered its three-month and 12-month return forecasts for the S&P's GSCI gauge of 24 commodities to 2.5% from 6% in three months and 3% in 12 months, according to the report.

The bank said it lowered its near-term commodities outlook to neutral from overweight. It exited its bet on lower gold prices, with a potential gain of 10%, while saying prices may fall even more.

"Commodity returns have dropped sharply so far in April as weaker-than-expected macroeconomic data releases in the US, Europe and China furthered concerns around global economic growth," analyst Samantha Dart said in the report.

Goldman Sachs issued a sell recommendation on gold on April 10, before it plunged 13% in the two sessions through April 15, the biggest drop in three decades.

On Tuesday, gold futures traded at $1,417.90 an ounce on the Comex in New York, up 7.3% from a 14-month low set on April 16. The bank said gold may trade at $1,530 in three months, $1,490 in six months and $1,390 in 12 months.

Goldman cut its near-term outlook for Brent oil to $100 a barrel, from a previous outlook of $110 a barrel, and lowered its 2013 forecast to $105 a barrel from $110 a barrel. The bank said it remains bullish on copper at lower prices.

It reduced its three-, six- and 12-month forecasts for coffee to $1.45 a pound, after previously projecting prices would rise as high as $1.75 a pound in a year.