Goldman Sachs says commodities to rally in 2012
Goldman Sachs forecast that commodities may rally 15% in the next 12 months, sticking with an "overweight" recommendation on raw materials.
By Bloomberg | Updated:
SINGAPORE: Goldman Sachs forecast that commodities may rally 15% in the next 12 months, sticking with an "overweight" recommendation on raw materials and predicting Brent crude may surge to highest level since 2008.
Commodities may gain as the global economy avoids recession next year and in 2013, analysts led by London-based Jeffrey Currie said in a report on Thursday. Brent, the benchmark used to price two-thirds of global oil supplies, may jump to $127.50 a barrel at the end of next year and $135 in 2013, it said.
Goldman's bullishness contrasts with the view from JPMorgan Chase, which cut commodities to "underweight" on November 22, citing policy failures in the US and crisis-hit Europe. Data on Thursday showed manufacturing in China, the largest user of energy and base metals, shrank for the first time since February 2009. "The European debt crisis remains a significant downside risk in 2012," Goldman said.
"However, as long as the risks manifest themselves in economic weakness and not in financial stress that would likely precipitate a global recession, it is unlikely to severely impact commodity markets." Commodities as measured by the S&P GSCI Spot Index are beating equities for a fifth consecutive year, signaling that demand from developing economies is sustaining global growth.
The gauge rallied 9.6% in October and 1.6% last month even as the euro-zone debt crisis intensified. "The risks to this view are skewed to the upside, particularly given the return of significant backwardation to the oil market that could become a very large driver of returns," Goldman said, referring to a pattern where near-term prices are higher than those further out.
Brent for January delivery, the most-active contract, traded at $110.95 at 2:19 pm in Singapore as the December 2012 contract was at $105.73. Brent peaked this year at $127.02 in April, and hasn't traded at more than $127.50 since August 2008. Goldman correctly advised investors to sell oil and copper in April and turned more bullish the next month.
Commodities may gain as the global economy avoids recession next year and in 2013, analysts led by London-based Jeffrey Currie said in a report on Thursday. Brent, the benchmark used to price two-thirds of global oil supplies, may jump to $127.50 a barrel at the end of next year and $135 in 2013, it said.
Goldman's bullishness contrasts with the view from JPMorgan Chase, which cut commodities to "underweight" on November 22, citing policy failures in the US and crisis-hit Europe. Data on Thursday showed manufacturing in China, the largest user of energy and base metals, shrank for the first time since February 2009. "The European debt crisis remains a significant downside risk in 2012," Goldman said.
"However, as long as the risks manifest themselves in economic weakness and not in financial stress that would likely precipitate a global recession, it is unlikely to severely impact commodity markets." Commodities as measured by the S&P GSCI Spot Index are beating equities for a fifth consecutive year, signaling that demand from developing economies is sustaining global growth.
The gauge rallied 9.6% in October and 1.6% last month even as the euro-zone debt crisis intensified. "The risks to this view are skewed to the upside, particularly given the return of significant backwardation to the oil market that could become a very large driver of returns," Goldman said, referring to a pattern where near-term prices are higher than those further out.
Brent for January delivery, the most-active contract, traded at $110.95 at 2:19 pm in Singapore as the December 2012 contract was at $105.73. Brent peaked this year at $127.02 in April, and hasn't traded at more than $127.50 since August 2008. Goldman correctly advised investors to sell oil and copper in April and turned more bullish the next month.
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