Daily Management Review

Goldman believes in commodities


12/12/2017


Goldman Sachs Group Inc. predicts that commodities will yield better returns than other assets in the long term, writes Bloomberg.



RMajouji
RMajouji
Strong growth in global demand for commodities gives more grounds for investing in them, the bank's report of December 11 says. Goldman expects a return of 10% in 2018, due to a market structure known as backwardation, where investors sell more expensive contracts with expiring maturities at the end of each month and buy less expensive futures.

The Bloomberg Commodity index rose by about 6% from the second half of June amid signs of a reduction in supplies and a stronger demand for raw materials, from oil to cotton. The cost of raw materials is growing, as current demand levels exceed the levels of available supplies, notes Goldman. The bank forecasts a yield of 15% next year thanks to higher prices for short-term oil futures than long-term contracts.

Goldman does not expect that the oil market will return to the contango situation in 2018, when longer-term futures are more expensive than shorter ones.

As for the broader industrial metals index, Goldman predicts that the yield will be mostly stable next year. Bank experts are most optimistic about copper prospects, and least optimistic about aluminum prospects. "In both cases, sustained and synchronous global growth will help maintain high demand for metals around the world in 2018," the bank believes. "The difference lies in the dynamics of supply."

Healthy growth of supply in the copper market is expected in 2018 and 2019 years. However, Goldman said that the boom in this market is coming to an end, as investments have declined sharply after the sale of commodities in 2014. This means that production may slow after 2019. At the same time, a positive outlook for demand contributes to the "bullish" mood of Goldman. The bank expects prices next year at $ 7050 per ton of copper on the London Metal Exchange.

At the same time Goldman notes the growing likelihood of increasing supplies of aluminum from China, mainly from areas with limited air pollution problems, and also from outside the Asian country. In these conditions, the bank adheres to the "bear" position on aluminum.

Earlier it was reported that copper and other metals have risen in price this year amid accelerated growth in developed countries and the recovery of demand in China. A number of analysts - from Goldman Sachs Group Inc. to the hedge fund Shanghai Chaos Investment Group - noted the efforts of President Xi Jinping to reduce the level of debt and limit the real estate sector as key constraints to commodity markets. 

source: bloomberg.com






Science & Technology

Baidu comes up with a self-driving bus

Developing countries are stepping up their own space programs

McAfee: Number of cybercrime attacks skyrocketed

RemoveDebris Mission To Clear Debris Of In Orbit Over Earth

British experts: Online gambling is dangerous

Vodafone Chooses ‘Highly Trafficked Urban’ Space As Its 5G Testing Grounds

Space To Become A Travel Destination By 2022

Dream Of Immortality Can Be Realised By 2045

Predicting A Patient’s Death Might Be Possible With Google’s Machine Learning Tool

Are online DNA databases dangerous?

World Politics

World & Politics

Was Trump's visit to the UK the last straw?

Prime Minister May Could Alter Brexit Strategies, Said Ress-Mogg

Le Maire: The US refused to release France from anti-Iran sanctions

One Belt, One Road is facing difficulties around the world

Qatar to raise $ 4 billion to buy Eurofighter Typhoon jets

The UK sets to turn all cars zero-emission by 2030

Brexit Minister’s Resignation States May’s Brexit Policies Weakening The Country’s Stance

Global Plastic Waste Can Wrap The Planet ‘Seven Times Every Hour’