Goldman says commodities to benefit as central banks cut rates
COMMODITIES will advance this year as central banks in the United States and Europe move to reduce interest rates, helping to support industrial and consumer demand, according to Goldman Sachs Group.
Raw materials may return 15 per cent over 2024 as borrowing costs come down, manufacturing recovers, and geopolitical risks persist, analysts including Samantha Dart and Daan Struyven said in a Mar 24 note. Copper, aluminium, gold and oil products may climb, according to the bank, which also stressed the need for investors to be selective as gains would not be universal.
Commodities have made a modest advance in the first quarter, with crude strengthening, gold hitting a record, and copper topping US$9,000 a tonne. Policymakers at both the US Federal Reserve and European Central Bank have signalled their intention to reduce borrowing costs this year as inflation ebbs. In addition, China has flagged further support for its recovery.
“We find that US rate cuts in non-recessionary environments lead to higher commodity prices, with the biggest boost to metals (copper and gold in particular), followed by crude oil,” the analysts said. “Importantly, the positive impact on prices tends to increase with time, as the growth impulse from looser financial conditions filters through.”
Goldman’s cautiously bullish outlook echoes comments from other market watchers. Commodities are entering a fresh cyclical upswing aided by tighter supplies and an upturn in the global economy, Macquarie Group said earlier this month. Jeff Currie, formerly the head of commodities research at Goldman and now at Carlyle Group, has also forecast gains as the Fed cuts rates. Elsewhere, JPMorgan Chase & Co highlighted gold’s upside potential.
Among Goldman’s year-end price forecasts, copper was seen at US$10,000 a tonne, aluminium at US$2,600 a tonne, and gold at US$2,300 an ounce. BLOOMBERG
GET BT IN YOUR INBOX DAILY
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
KEYWORDS IN THIS ARTICLE
BT is now on Telegram!
For daily updates on weekdays and specially selected content for the weekend. Subscribe to t.me/BizTimes
Energy & Commodities
US, Philippines eye agreement to cut China nickel dominance
Oil eases on higher US crude output, hopes of Israel-Hamas ceasefire
Glencore now sees FY trading division profit between US$3 billion-US$3.5 billion
Hong Kong team plants seeds to safeguard legacy grains
Gold holds steady as investors focus on US Fed meeting
Chevron CEO expects ExxonMobil arbitration resolved in coming months