Agriculture, Commodities, Currencies, Emerging Markets, Energy, Frontier Markets, Metals, Stocks

Short Commodities, This Rally Will Falter: Goldman Sachs

GS Metals

Goldman Sachs Group Inc. predicted a rally in commodities from iron ore to gold will falter and forecast copper and aluminum prices will slide as much as 20 percent over the next year,” Bloomberg says.

According to the news agency:

Any increase in raw material prices will prompt more supplies to enter the market, making it difficult for any advance to be sustained, analysts including Jeffrey Currie wrote in a report dated March 7. The bank maintained its bearish outlook for gold, said iron ore’s surge would prove temporary and reiterated that oil will fluctuate between $20 and $40 a barrel. Goldman also said it was a good time to make bets that copper and aluminum would decline.

Goldman’s Opinions & Target Prices

Iron Ore: a year-end price target of $35 a ton.

The physical shortfall in steel supply can be filled easily and the subsequent deterioration in steel margins is likely to put iron ore prices under renewed pressure, (…)

The market fundamentals are unchanged and the current rally is only a brief lull before production cuts at high cost mines are required to make room for low-cost producers.

Copper: In Goldman’s 12-month view, copper may drop to $4,000.

With prices rising significantly, and with the structural case for base metals remaining very poor we recommend producers and investors with longer-term horizons begin implementing hedging strategies and consider short positions in copper and aluminium over the coming month.

Oil: the current oil market is still oversupplied and prices have to remain lower.

Only a real physical deficit can create a sustainable rally which is still months away should the behavioral shifts created by the low prices in January and February remain in place.

Gold: short the metal, a near-term target is $1,100 an ounce.

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