Goldman Sachs (NYSE:GS) is maintaining its bullish stance on commodities as they continue to enjoy strong cyclical and structural support, and as the US and Europe move closer to cutting interest rates.
The investment banking firm said it sees raw materials potentially returning 15 percent in 2024.
“We find that US rate cuts in non-recessionary environments lead to higher commodity prices, with the biggest boost to metals (copper and gold in particular), followed by crude oil,” Bloomberg quotes analysts Samantha Dart and Daan Struyven as saying in a note this past Sunday (March 24). “Importantly, the positive impact on prices tends to increase with time, as the growth impulse from looser financial conditions filters through.”
Copper and gold in particular have already rallied during the first quarter of the year, with the former moving past US$9,000 per metric ton and the latter breaching the US$2,200 per ounce mark.
Goldman is calling for copper to break US$10,000 by the year's end and for gold to hit US$2,300.
Other commodities, such as aluminum and oil products, are also set to make a continuous climb.
Aluminum is expected to reach US$2,600 per metric ton by the end of 2024, while Brent crude is likely to remain "well supported" within the range of US$70 to US$90 per barrel. The bank also underscored the role of commodities as a geopolitical hedge.
While Goldman is positive on those commodities, the same cannot be said for battery metals, where its outlook is more bearish. "Within the industrial metals, the segment with the most bearish fundamentals remains battery materials ... we believe it is too early to call a decisive end to these respective bear markets,” the bank said.
Battery metals — which include lithium, nickel, and cobalt — have seen increases in demand alongside the production growth of wind turbines, solar panels and electric vehicles (EVs). However, prices for these metals have taken a tumble in the last 18 months due to factors including oversupply and lower sales volumes from EV manufacturers.
Goldman anticipates 2024 price declines of 9 percent, 13 percent, and 27 percent decline for cobalt, nickel, and lithium carbonate, respectively. With that in mind, it encourages taking a selective approach in the commodities sector.
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Securities Disclosure: I, Giann Liguid, hold no direct investment interest in any company mentioned in this article.
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