Goldman Sachs: Pressure on commodities is likely to persist for next 12 months
"We have been forecasting weak commodity returns since last fall,
although the extent of this weakness has far exceeded our initial
expectations," Goldman Sachs said in a note on Thursday, noting that it does not expect a rebound for the next 12 months.
This year has been pretty nervous for commodity prices.
A slowdown in China gobbled up raw materials everywhere from Australia to Chile and deepened an oversupply in most major commodities.
Supply adjustments to trim production are still not enough and demand is lackluster, the investment bank added.
However, there is a hope on the horizon for a rebound in the global business cycle beginning early 2016, which is likely to spur better commodity returns.
Still, growth headwinds could postpone the entry to the recovery phase and there are downside threats.
"As a result, we don't believe that current prices present an appealing entry point to position for higher commodity returns, despite the perceived asymmetric risk-reward at low spot prices and post such weak returns," Goldman said, adding that this should not stop the long-term strategic case for including commodities in asset allocation.
The bank is maintaining its outlook for Brent crude oil at
$50 a barrel and for U.S. WTI at $45 a barrel in 2016 due to the glut.
It expects gold to remain at $1,100 per ounce for the next three months, $1,050 an ounce for the next six months and $1,000 an ounce for the next 12 months.
Copper
prices are forecast to drop to $4,800 a ton by end -2015 and to $4,500 a ton by
end-2016.
Spot iron ore prices are expected to decline to $44 a ton next year and $40 a ton in 2017 from around $46 a ton now.
