Goldman: Best Commodity Returns in Energy


"The bank forecasts a 27% advance in energy over 12 months."

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% advance in energy over 12 months, a 17% jump in precious metals and a 15% gain in industrial metals, analysts led by London-based Jeffrey Currie said in a report today. Agriculture will decline 10%, 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% 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% annual pace in the second quarter from an initially reported 2.4%.

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 US$4.65 a bushel from US$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.

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