Analysts at Goldman Sachs said they remained selectively bullish on commodities, forecasting headline returns to rise from 13% year-to-date to 18% by year-end.
The bank cited several reasons for its optimism, including robust demand growth, structural upside in industrial metals and gold, and a lower geopolitical risk premium for oil.
Analysts identify five key market trends that will create structural opportunities in commodities: disinvestment, decarbonization and climate change, risk mitigation, data centers and artificial intelligence, and defense spending. They also highlight that low investment in commodities creates limited choice, requiring higher prices to attract investment in green capital.
Additionally, the firm notes that geopolitical risk mitigation and strategic restocking are supporting demand for gold and critical commodities, while data centers and artificial intelligence are supporting demand through power and higher earnings. Defense spending is also increasing demand for metals and distillate fuels.
Specifically, Goldman Sachs is forecasting a “sharp rise” in prices, expecting an additional 15% increase to $12,000 a tonne by the end of the year as supplies of cheaper substitutes dwindle.
In gold, analysts forecast a 14% rise to $2,700 an ounce, driven by strong demand from emerging market central banks and Asian households.
Goldman Sachs forecasts the oil market will remain in the $75-$90 range, noting the cost of net long oil positions due to geopolitical hedging and yields.
However, they see limited potential for further price increases this summer in the US and Europe, given storage levels are still high.
Overall, Goldman Sachs remains confident in structural opportunities and commodity demand drivers, expecting yields to improve by year-end.