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Goldman Sachs Economists Largely Bullish on Commodities

By on October 6, 2011

Goldman Sachs economists working out of the companys Global research Office have released a new report that is bullish on commodity prices over the mid to long term.

After the biggest quarterly decline in commodity prices since Lehman Brothers triggered a global meltdown in 2008, Goldman Sachs has forecast that key manufacturing ingredients such as oil, aluminium, copper, nickel and zinc would jump in the coming months.

Goldman believes that this boom will be driven not by developed countries currently facing another possible economic recession but the key driver is reported to be the emerging economies especially Brazil, Russia, India and China.

Jeffrie Currie, an analyst at Goldman Sachs, said: “With recent GDP revisions by our economists falling hardest on Europe but emerging market growth expectations still relatively solid, we continue to believe that demand growth in 2012 will be sufficient to tighten major commodity markets.”

Despite forecasting a rebound in prices in 12 months time, Goldman cut its predictions on a range of commodities such as zinc, aluminium and nickel after the bank’s economists cut their global growth forecast for next year to 3.5 per cent from 4.3 per cent.

Goldman reduced its 12-month forecast for Brent crude, which is currently trading around $101 a barrel, by $10 to $120. Meanwhile, it lowered its forecast for copper – down 28 per cent so far this year – by 15 per cent to $6,886.50 a tonne.

The S&P GSCI enhanced commodity index of 24 key industrial and precious metals and staple foods fell by 14 per cent in the three months to 30 September, leaving it down nearly 8 per cent on the year.

Industrial metal prices are down nearly 24 per cent this year, as optimism about a strengthening economy gave way to concerns about the the debt crisis in the West.