BLBG:Goldman Sachs Maintains Crude Oil, Copper Forecasts Even as Risks Increase
Goldman Sachs Group Inc. (GS) said that global economic growth led by emerging markets is adequate to drive an expansion in demand for raw materials, maintaining forecasts for rallies in Brent crude oil and copper.
“We remain constructive on commodities,” Allison Nathan, an analyst, said in an interview today. Still, the “risks to our bullish views have risen,” Nathan said in Singapore, citing Europe’s sovereign-debt problems and a “mixed bag” of economic data from the United States, the world’s largest economy.
Goldman’s position contrasts with the outlook from Societe Generale SA’s global asset-allocation team, which said commodities are in a “danger zone” as growth slows, according to a report distributed yesterday that forecast a decline in oil.
“We’ve seen emerging-markets demand for key commodities, including oil, holding up well,” Nathan said. There haven’t yet been signs that the economic woes in developed markets are spreading to emerging economies, she said.
Goldman correctly advised investors to sell oil and copper in April, then turned bullish in May before prices rebounded. Last month, the bank forecast gains for Brent, zinc, and other commodities in the next 12 months, analysts led by Jeffrey Currie said in an Aug. 8 report. Copper may climb to $11,000 per metric ton, while Brent gains to $130 a barrel, the report said.
Commodities Decline
The Standard & Poor’s GSCI Spot Index of 24 commodities has dropped 14 percent since April 11 on speculation that the global economic recovery may be faltering. Three-month copper on the London Metal Exchange traded at $8,688 per ton at 12:15 p.m. in Singapore, while Brent was at $112.10 per barrel.
Goldman economists forecast that China’s economic growth may be 9.2 percent next year, compared with an estimate of 9.3 percent for this year, according to Nathan. The nation is the world’s largest user of metals and energy.
Commodities including metals rallied today after French President Nicolas Sarkozy and German Chancellor Angela Merkel said they are “convinced” Greece will stay in the euro area. European governments are aiming to ratify a July 21 accord to bolster a bailout fund and extend a second rescue to Greece.
Investor skittishness over the spread of Europe’s debt crisis combined with signs that U.S. growth may be slowing have roiled markets worldwide. Recent data have shown U.S. retail sales were unchanged in August, while the economy generated no jobs and earnings fell.
Societe Generale’s report said that there may be a “meaningful drop” in the prices of so-called cyclical commodities such as oil and copper. Gold may rally from an increase in risk aversion, according to the report.
To contact the reporters on this story: Chanyaporn Chanjaroen in Singapore at cchanjaroen@bloomberg.net; Christian Schmollinger in Singapore at christian.s@bloomberg.net
To contact the editors responsible for this story: James Poole at jpoole4@bloomberg.net; Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net
