Goldman Says Commodities to Benefit as Central Banks Cut Rates

Economic

Commodity

Summary:

Commodities will advance this year as central banks in the US and Europe move to reduce interest rates, helping to support industrial and consumer demand. But the analyst said it is too early to call a decisive end to these respective bear markets.

Commodities will advance this year as central banks in the US and Europe move to reduce interest rates, helping to support industrial and consumer demand, according to Goldman Sachs Group Inc.

Raw materials may return 15% over 2024 as borrowing costs come down, manufacturing recovers, and geopolitical risks persist, analysts including Samantha Dart and Daan Struyven said in a March 24 note. Copper, aluminum, gold and oil products may climb, according to the bank, which also stressed the need for investors to be selective as gains wouldn’t be universal.

Commodities have made a modest advance in the first quarter, with crude strengthening, gold hitting a record, and copper topping $9,000 a ton. Policymakers at both the US Federal Reserve and European Central Bank have signaled their intention to reduce borrowing costs this year as inflation ebbs. In addition, China has flagged further support for its recovery.

“We find that US rate cuts in non-recessionary environments lead to higher commodity prices, with the biggest boost to metals (copper and gold in particular), followed by crude oil,” the analysts said. “Importantly, the positive impact on prices tends to increase with time, as the growth impulse from looser financial conditions filters through.”

Goldman’s cautiously bullish outlook echoes comments from other market watchers. Commodities are entering a fresh cyclical upswing aided by tighter supplies and an upturn in the global economy, Macquarie Group Ltd. said earlier this month. Jeff Currie, formerly the head of commodities research at Goldman and now at Carlyle Group LP, has also forecast gains as the Fed cuts rates. Elsewhere, JPMorgan Chase & Co. highlighted gold’s upside potential.

Among Goldman’s year-end forecasts, copper was seen at $10,000 a ton, aluminum at $2,600 a ton, and gold at $2,300 an ounce, which would be a nominal record. The base metals were last at $8,884 a ton and $2,306 a ton on the London Metal Exchange, while bullion was close to $2,167 an ounce.

“In the midterm, we continue to hold a constructive view on gold underpinned by eventual Fed easing, which should crucially reactivate the largely dormant ETF buying,” the analysts said, referring to exchange-traded fund flows.

In contrast — and highlighting its call for a selective approach — the bank remained bearish on the outlook for battery metals such as nickel, cobalt and lithium carbonate. “We believe it is too early to call a decisive end to these respective bear markets,” the analysts said.

Source: Bloomberg

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

You understand and acknowledge that there is a high degree of risk involved in trading. Following any strategies or investment methods may lead to potential losses. The content on the site is provided by our contributors and analysts for information purposes only. You are solely responsible for determining whether any trading assets, securities, strategy, or any other product is suitable for investing based on your own investment objectives and financial situation.

Risk Disclosure

The risk of loss in trading financial instruments such as stocks, FX, commodities, futures, bonds, ETFs and crypto can be substantial. You may sustain a total loss of the funds that you deposit with your broker. Therefore, you should carefully consider whether such trading is suitable for you in light of your circumstances and financial resources.

No decision to invest should be made without thoroughly conducting due diligence by yourself or consulting with your financial advisors. Our web content might not suit you since we don't know your financial conditions and investment needs. Our financial information might have latency or contain inaccuracy, so you should be fully responsible for any of your trading and investment decisions. The company will not be responsible for your capital loss.

Without getting permission from the website, you are not allowed to copy the website's graphics, texts, or trademarks. Intellectual property rights in the content or data incorporated into this website belong to its providers and exchange merchants.

Recent Searches

Top Searches

Markets

Analysis

User

24/7

Economic Calendar

Education

Data

Goldman Says Commodities to Benefit as Central Banks Cut Rates

Source: Bloomberg

Risk Disclosure