Goldman Sachs Asking Investors Taking A Selective Approach in the Commodities Sector

Published on: Mar 28, 2024
Author: Caroline Kong

Goldman Sachs issued bullish forecast for commodities this week, arguing that commodities will continue to receive strong cyclical and structural support as the timing of interest rate cuts in the U.S. and Europe approaches. Goldman Sachs analysts see a potential return of 15 per cent for raw materials in 2024.

Analysts Samantha Dart and Daan Struyven wrote in a report to clients that lower borrowing costs, a manufacturing recovery and geopolitical risks will drive commodity prices higher, with certain metals especially copper and gold getting the biggest boost, followed by crude oil. And the positive impact of loose financial conditions on commodity prices tends to increase over time.

The investment bank’s bullish forecasts come as copper and gold both rebounded in the first quarter of this year, with copper price breaking through $9,000 per tonne and gold breaking through the $2,200 per ounce to new record highs.

Goldman Sachs expects, by the end of this year, copper prices will break through $ 10,000 per tonne, and gold will reach $ 2,300 per ounce.

In addition to copper and gold, Goldman Sachs expects aluminium prices to reach $2,600 per tonne by the end of 2024, while Brent crude oil could be better supported between $70 and $90 per barrel. Analysts also emphasised the role of commodities as a geopolitical hedge.

However, analysts are cautious about the outlook for battery metals this year. The report notes that among industrial metals, the most fundamentally bearish sector remains battery materials, and it is too early to assert that the bear market in these sectors is over.

As production of wind turbines, solar panels and electric vehicles (EVs) grows, so does the demand for battery metals (including lithium, nickel and cobalt). However, over the past 18 months, the prices of these metals have fallen off as a result of factors such as oversupply and declining sales by EV manufacturers.

Goldman Sachs expects prices for cobalt, nickel and lithium carbonate to fall by 9 per cent, 13 per cent and 27 per cent respectively in 2024.

Copper Gold Lithium Oil & Gas