Goldman: Commodities Will Surge This Year

Goldman Sachs is predicting 17 percent returns in the commodities market in coming months, according to an article in Bloomberg.

In a report from the firm, analysts stated, “Given the size of dislocations in commodity pricing relative to fundamentals—with oil now having joined metals in pricing below cost support—we believe commodities offer an extremely attractive entry point for longs in oil, gold and base.”

The article lists some of Goldman’s insights regarding performance over the coming year:

Oil: the firm expects an OPEC supply cut and a return to “backwardation.”.

  • Gas: A cold start to the winter resulted in a rally in contracts and has “dislocated the April 2019 natural gas contract, leaving it significantly backwardated versus October.” Goldman believes this spread will continue to narrow, the article reports.
  • Gold: According to Goldman, the market has priced in most of the Fed’s rate hikes and sees a reverse coming in the strong dollar trend. “If U.S. growth slows down next year, as expected, gold would benefit from higher demand for defensive assets,” the firm said, adding that central bank buying may offer additional support.
  • Agriculture: Goldman’s view is generally “more optimistic than currently priced in by markets.”