Commodity bull Goldman says ‘we were wrong’ but sticks to view

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Commodity cheerleader Goldman Sachs Group Inc. said its forecasts for major rises in raw materials this year hadn’t panned out well so far, but coupled that assessment with another call for a major rally.

“Bulls, like ourselves, find comfort in the fact that end-use demand across the commodity complex has not shown recessionary signs and investment in supply remains elusive,” analysts including Jeffrey Currie said in a note. “But this misses the point that we were wrong on price expectations.”

Commodities have sunk this year, with a Bloomberg gauge tumbling by almost 10% to hit the lowest since 2021 this week. The declines in energy and metals have been driven largely by China’s weaker-than-expected emergence from Covid Zero and concerns that the US is now headed for recession after an aggressive round of rate hikes from the Federal Reserve to contain inflation.

“Prices continue to move against our forecasts,” the analysts said in the May 23 report, pinning the probable explanation for their miss on an unprecedented clear-out of stockpiles and positioning. “What is the explanation? It is likely the largest commodity destocking the complex has ever witnessed.”

Against that backdrop, Goldman analysts expect commodities to come roaring back should recession concerns prove to be misplaced. “The absence of a recession would likely lead to higher oil and commodity prices as well as higher rates, to which equities would likely react poorly,” they said. They are now forecasting that the S&P GSCI gauge of commodities will return 30.3% on a 12-month horizon.

Read more: Goldman hikes gold forecast, reiterates bullish commodities view


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