Goldman Sachs is maintaining its long trade and overweight recommendation on commodities versus other assets although various issues have slashed commodity prices and returns in recent days as well as heightened uncertainties. The bank said on Monday several factors have prompted it to keep its constructive view on commodity intact over the next year, including its optimism that global growth is sufficient to tighten key commodity markets, expected strong growth in emerging markets and resilient commodity balances in the first half of 2011. "Supply disappointments have been substantially offsetting if not dominating demand disappointments in key commodity markets; several physical commodity indicators have shown signs of strength," the bank said, pointing to the other factors that led it to maintain its view on commodity. Goldman said it kept its recommended long positions in key cyclical commodities, including Brent crude oil, copper and soybeans, and its overweight recommendation for commodities relative to other asset classes, especially given the sharp sell-off across the commodity complex in recent days. Commodities from oil to grains slid, while gold rose to a record on Monday, as investors sought shelter in safer assets after the United States' loss of its prized AAA credit rating dealt a major blow to confidence. "Although the recent apparent macro deterioration and economic downgrades are not sufficient to alter our mainline commodity views, they do suggest that the prior upside risk skew to our forecasts has been slightly reduced, all else equal," the investment bank said. Goldman said stronger global growth expectations heading into 2011 had led it to estimate that supply constraints of some commodities and crude oil in particular would be hit hard in 2012, requiring substantial price rationing to return the market to balance. "As global growth expectations decline, the anticipated strength of this 'hit' diminishes, and if growth declines far enough, the 'hit' may not happen at all," the bank said.

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