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Goldman Sachs predicting commodity prices will rise

Date: Fri, 8 Jul 2011 | Author: Paul Sanderson

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Investment bank Goldman Sachs has become bullish on a range of commodities including metals and oil.

Analysts at the firm suggest that commodity speculators and buyers should invest long in copper, zinc and gold, although they expect gold’s run will be short-lived with expectations that US interest rates will rise in 2012.

The company also recommends buying December 2012 Brent crude oil contracts on the expectation that it will rise in price overall through this year and next.

In a research note, Goldman Sachs said: “We believe that the Greek situation, ongoing tension between the inflation/growth tradeoff in China, and still mixed economic data from several key economies will continue to drive near-term volatility in the commodity markets.

“However, we maintain that commodity prices and returns will rise further later this year and into 2012. Underlying this view are Goldman Sachs economists’ expectations for reacceleration in global economic growth during 2H2011 as temporary drags from the Japanese earthquake and the April oil price spike diminish.

“On net, while growth is expected to slow in 2011 from 2010’s above-trend pace, it is expected to remain substantially positive and generally supportive of rising commodity demand. We expect this demand growth will be sufficient to tighten key commodity markets over the next six to twelve months, particularly for those markets where supply constraints will become binding even on slower economic growth.”

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