Goldman Sachs continues to express confidence in the commodities market for 2024, citing both cyclical and structural factors alongside geopolitical considerations. Year-to-date returns of 9% are expected to climb to 15% by year-end.
The bank’s research indicates a projected 20% return in specific sectors, notably energy and industrial metals excluding nickel and zinc, within the S&P GSCI Commodity Index for the year.
Data analysis from various markets, both developed and emerging, reinforces the belief in cyclical support for commodities in 2024. Anticipated rate cuts in the U.S. and Europe from June are predicted to further bolster demand and prices, particularly in copper, aluminum, and oil products.
Structural elements remain favorable, as evidenced by strong demand for green metals and healthy oil product margins thus far. Additionally, commodities are perceived as a hedge against geopolitical uncertainties, underscored by ongoing disruptions in Red Sea shipping routes and recent attacks on Russian refining facilities.
While copper is highlighted for its bullish prospects, with increasing scarcity expected in the latter half of the year, Goldman Sachs adopts a bearish stance on commodities like U.S. natural gas, lithium, nickel, and zinc.
In terms of industrial metals, battery materials are viewed with caution, as the bank believes it is premature to declare an end to their respective bear markets.
Goldman Sachs suggests investors short Oct’24 Henry Hub, while targeting a 9%, 13%, and 27% downside in cobalt ($26,000/t), nickel ($15,000/t), and lithium carbonate ($10,000/t), respectively, over the next 12 months.
The retention of a bullish outlook by Goldman Sachs indicates a measured confidence in the resilience and potential of the commodities market amidst global uncertainties. Investors are advised to consider these projections carefully as they navigate the complexities of the commodities landscape in 2024.
photo source: Google
By: Montel Kamau
Serrari Financial Analyst
26th March, 2024
