Goldman Sachs Group Inc forecast that commodities could rally 15 percent in the next 12 months, sticking with an “overweight” recommendation on raw materials and predicting Brent crude could surge to its highest level since 2008.
Commodities could gain as the global economy avoids recession next year and in 2013, analysts led by London-based Jeffrey Currie said in a report yesterday.
Brent, the benchmark used to price two-thirds of global oil supplies, could jump to US$127.50 a barrel at the end of next year and US$135 in 2013, it said.
Goldman’s bullishness contrasts with the view from JP-Morgan Chase & Co, which cut commodities to “underweight” on Nov. 22, citing policy failures in the US and the debt crisis in Europe.
“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 percent in October and 1.6 percent last month, even as the eurozone 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 next month delivery, the most-active contract, traded at US$110.95 at 2:19pm in Singapore as the December next year contract was at US$105.73. Brent peaked this year at US$127.02 in April, and has not traded at more than US$127.50 since August 2008.
Goldman economists reduced their forecast for global economic growth next year from 3.4 percent from 3.2 percent, the report said.
“This reduced outlook, but avoidance of global recession, makes it more likely that commodity markets can maintain a central course between the whirlpool of a world economic recession and the rocks of potential shortages, it said.”
The 12-month target for copper was maintained at US$9,500 per tonne on China’s demand growth, the Goldman report said. The price for three-month delivery fell as much as 1.3 percent to US$7,781.50 on the London Metal Exchange yesterday.
The forecast for Comex gold was held at US$1,940 an ounce in 12 months, the report said. Futures traded at US$1,746.90 at 2:15pm.
Chicago-traded corn could rise to US$6.85 per bushel in three months, before sliding to US$5.50 in 12 months, the bank said, expecting “large” supplies from non-US countries.