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

Large U.S. Study Finds Detection Of Irregular Heart Beat By Apple Watch

Apple to present Netflix competitor at the end of March

Live Human Under-Skin Chip Implantation Takes Place At Barcelona

IDC: Wearable tech gadgets market is booming

Second Patient In 12 Years Becomes HIV Free By Bone Marrow Transplantation

Car-Sharing Platforms Could hold The Key To 5G & Auto Industry Collaboration

Bezos tells about his space plans

Fast Company: Apple isn't the most innovative anymore

U.S. Space Program Could Be Delayed Due To SpaceX, Boeing Design Risks: Reuters

What trends will be affecting the health sector in the coming years?

World Politics

World & Politics

China's expansion into Europe: Italy’s ports are next

US watchdog is accused of violating aircraft certification process

Large Section Of Citizens Unhappy With Public Services & Benefits: OECD Survey

Largest companies reveal volumes of plastic produced by them

US Warning To Germany About Intelligence Sharing Over Huawei Ban

Mercer reveals the world’s safest cities

No vaccinations, no school: Italy’s new law

Why the new Aachen Treaty cannot save France-Germany relation