Commodities demand from emerging markets and limited growth in supplies will help to support prices toward the end of the year , according to Goldman Sachs Group Inc., which backed oil, gold, copper, zinc and platinum.
The bank reiterated an “overweight” recommendation on commodities, analysts led by Allison Nathan and Jeffrey Currie wrote in a report. Goldman pared its 12-month forecast for gains in the S&P GSCI Enhanced Total Returns Index to 19 percent from 21.6 after recent gains in agricultural commodities and metals.
Commodities last week capped their worst weekly performance in six after the Federal Reserve said the recovery is weakening and European industrial output fell. Reports also showed China’s industrial production, retail sales and new lending grew in July at a slower pace than in June. The S&P GSCI Total Return index lost 4.9 percent last week, the most since the week to July 5.
“High and rising emerging-market demand levels against limited supply growth in key commodities are likely to increasingly tighten balances,” the analysts wrote in the Aug. 13 report. “Nevertheless, the current softness in economic data, combined with increasingly mixed signals from the underlying commodity markets, is likely to continue to generate choppy commodity price action in the near term.”
Gold’s Surge
Gold, which surged to a record $1,265.30 an ounce in June amid concern that sovereign-debt levels in Europe may be excessive, traded at $1,217.35 at 9:05 a.m. in Singapore, 11 percent higher since the start of the year. New York crude futures were little changed at $75.34 a barrel, 5.1 percent lower since 2010 began.
Commodity prices may advance into the end of the year on evidence of increased oil demand in China, a decline in crude stockpiles in Europe and the U.S., and further declines in metals inventories, the report said.
“We expect upside to be greatest for crude oil, copper, zinc, platinum and gold,” it said. “Improved data will likely be required to sustain rising prices.”
Goldman Sachs last week backed gold to resume a rally and climb to a record $1,300 an ounce within six months on renewed investor interest. The precious metal, which has risen for nine years to last year, may also climb in 2011, the report said.
A ban on wheat exports by Russia, effective from yesterday, helped to drive Chicago futures to $8.68 a bushel earlier this month, the highest price in almost two years. The country, the third-largest wheat grower last year, is battling reduced grains production amid the worst drought in at least 50 years.
“Commodity returns rose over the past month led by sharp gains in the agricultural complex owing to weather-related supply shocks in wheat,” according to the Goldman report.
