The best returns in commodities over the next 12 months will probably be in energy and the biggest losses in agriculture, Goldman Sachs Group Inc. said.
The bank is forecasting a 27 percent advance in energy over 12 months, a 17 percent jump in precious metals and a 15 percent gain in industrial metals, analysts led by London-based Jeffrey Currie said in a report today. Agriculture will decline 10 percent, the team forecast.
“For the more cyclical commodities, oil and copper, while continued indications of more supportive policy in the U.S. and China, better macro data in these key countries, and improving commodity data have pushed prices higher within their respective trading ranges, we continue to expect them to break out to the upside in coming months,” the analysts wrote in the report.
The Reuters/Jefferies CRB Index of 19 raw materials fell 1.7 percent this year, led by declines in natural gas, cocoa and sugar, amid mounting concern about the strength of the global recovery. Crude, gasoline and heating oil inventories reached a 20-year-high last month as the U.S. Commerce Department said the economy probably expanded at a 1.6 percent annual pace in the second quarter from an initially reported 2.4 percent.
While agriculture is forecast by Goldman to be the only commodity group to drop over 12 months, the bank raised its three-month forecasts for corn, cotton, arabica and raw sugar.
Goldman increased its three-month corn estimate to $4.65 a bushel from $4.15 and said the market will have a “further tightening” because of demand for ethanol and animal feed. Wheat prices, which as much as doubled since June, may decline in the “medium term,” Goldman said.
The bank also raised its arabica-coffee forecast to $1.80 a pound from $1.55 and raw-sugar to 20 cents a pound from 15 cents. The cotton estimate increased to 90 cents a pound from 85 cents. The cocoa forecast declined to $2,700 a metric ton from $3,100. Goldman raised its live-cattle forecast to 105 cents a pound from 93 cents.
The bank is forecasting a 19 percent return in the S&P GSCI Enhanced Total Return Index over 12 months. The gauge declined 4 percent this year.
© Copyright 2017 Bloomberg News. All rights reserved.