2024-03-25 13:18:00
Investing.com – Commodity prices are expected to rise this year as central banks in the U.S. and Europe move to lower interest rates, helping to support industrial and consumer demand, according to Goldman Sachs Group (NYSE:).
The bank’s analysts, including Samantha Dart and Dan Struyven, said in a note dated March 24 that raw materials could rise by 15% during 2024 as borrowing costs fall, manufacturing recovers, and geopolitical risks persist. Aluminum, gold and oil products may rise, according to the bank, which also stressed the need for investors to be selective because the gains will not be global.
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Commodities made modest progress in the first quarter, with the price of crude oil strengthening, hitting a record high, and copper surpassing 9,000 per tonne. Policymakers at both the US Federal Reserve and the European Central Bank have indicated their intention to reduce borrowing costs this year as inflation subsides. In addition, the Chinese economy is beginning to recover.
The analysts said: “We find that US interest rate cuts in non-recessionary environments lead to higher commodity prices, and the biggest push will be for metals (copper and gold in particular), followed by them.” “Importantly, the positive impact on prices tends to increase over time, with the growth driver emerging from more flexible financial conditions.”
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Goldman’s cautiously bullish outlook echoes comments from other market watchers. Commodities are entering a new cyclical recovery supported by tight supplies and a rebound in the global economy, Macquarie Group Ltd said earlier this month. Jeff Currie, former head of commodities research at Goldman and now at Carlyle Group, also predicted further gains as the Fed cuts interest rates. Elsewhere, JPMorgan Chase & Co. highlighted gold’s upside potential.
Among Goldman’s year-end forecasts, copper is expected to reach $10,000 per ton, aluminum at $2,600 per ton, and gold at $2,300 per ounce, which would be a new record. Base metals were last trading near $8,886 per ton and $2,310 per ton on the London Metal Exchange (LON:), while bullion approached $2,174 per ounce.
“In the medium term, we continue to maintain a constructive view on gold supported by eventual Fed easing, which should decisively reinvigorate largely dormant ETF purchases,” the analysts said, referring to exchange-traded fund flows.
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In contrast – and highlighting its call for a selective approach – the bank remained pessimistic about the outlook for battery metals such as nickel, cobalt and lithium carbonate. “We believe it is too early to declare a definitive end to these bear markets,” the analysts said.
While the Fed left interest rates unchanged last week, officials stuck to their expectations of three cuts this year. However, a measure of US inflation due in the coming days – the Fed’s preferred measure of underlying price pressures – may have remained uncomfortably high in February.
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