A note from Goldman Sachs on commodities has a very bullish outlook.
Analysts at the bank say commodities will show “superior total returns” through this year, citing economic "macro and micro dynamics re-aligning again", low inventories.
On Oil:
- Over a 12-month period, the bank forecast returns of 46.9% from energy, 29.6% from industrial metals and 5.7% from precious metals
- “Oil markets are not pricing the expected uplift in demand combined with the downturn in Russian production”
- “China’s reopening is a game-changer”
- “Commodities like crude oil, refined petroleum products, LNG, and soybeans are particularly set to benefit from China’s demand tailwind”
- over the next 12 months GS sees energy returns of around 47%
- expectations of smaller rate hikes from the U.S. Fed will contribute to strong commodity demand
Goldman Sachs forecasts WTI averaging $92 / bbl in 2023. Also like gold:
- “While central bank tightening and the USD have been macro headwinds for commodities in second half of 2022, we believe a sustained inflection in the USD provides an ingredient for a fairly significant upside in commodities”
- Gold, in particular, is likely to be on a cusp of sustained upside as de-dollarisation is very bullish gold
- at a time that the Fed is likely to increasingly shift towards growth concerns slowing its rate hike path allowing ETF holdings to stabilise
