Goldman Sachs said it expects upside in oil, gold and copper prices citing greater supply risks, stronger fundamentals. "We view gold and copper as providing the best value opportunities relative to our view of fundamentals in 2012," the investment bank said on Friday, citing remaining risks of substantial supply shortfalls. Goldman said it maintained its 12-month return forecast for the S&P GSCI Enhanced Commodity Index of 15 per cent and its overweight allocation to commodities remained unchanged. Tensions over Iran's nuclear programme and a fresh wave of sanctions against it could weigh on oil prices, while signs of improvement of the US and Chinese economy have prompted recent gains, Goldman Sachs said, earlier this week. "Confidence is increasing that the impact of the European debt crisis is remaining confined to Europe," analysts David Greely and Stefan Wieler with Goldman Sachs said in a research note. "As oil producers and refiners have reacted to the new US sanctions against Iran and prepared for the likely implementation of a European Union embargo of Iranian oil, the escalating tensions between Iran and the West have likely been exerting a near-term negative influence on crude oil prices," the bank said. "There is strikingly little evidence that any meaningful 'Iran premium' is being embedded in current crude oil prices." Goldman, which has been one of the bulls on oil prices, pointed out that prices could be supported once the EU embargo on Iranian oil takes effect. "We would expect European refineries to replace the Iranian crude with Saudi barrels, clearing the current surplus, while China absorbs the surplus of Iranian crude, in part to fill its strategic reserves," the analysts said. "However, OPEC spare capacity is quite low, which leaves the market very vulnerable to further supply losses, with the potential for further losses particularly in Iran and Nigeria."

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