Goldman Raises 3-Month Forecast for Commodities to ‘Overweight’

Goldman Sachs Group Inc. (GS) raised its three-month outlook for raw materials to “overweight” after prices declined.

The Standard & Poor’s GSCI Enhanced Commodity Index will advance 3 percent in 12 months, led by gains of 7 percent in industrial metals, 5 percent in livestock and 3 percent in energy, the bank said in its monthly asset allocation report dated yesterday. On Feb. 8, Goldman forecast a 1 percent return.

“The recent sell-off in commodities on worries about Chinese growth is overdone in our view and we upgrade to overweight on a 3-month horizon,” Jeffrey Currie, head of commodities research in New York at the bank, said in the report.

The S&P GSCI Enhanced gauge slid 5.6 percent the past four weeks and is down about 0.5 percent this year. Hard red winter wheat traded in Kansas City is down the most, at 12 percent this year and copper fell 2.9 percent.

Goldman forecasts copper will rise to $9,000 a metric ton in six months as demand from top consumer China picks up “both seasonally and on the back of continued growth in construction completions, property sales and power infrastructure related demand,” Currie said in the report. Prices will fall to $8,000 a ton in 12 months as Chinese construction completions diminish, the bank said.

Copper for delivery in three months fell 0.5 percent to $7,729 a ton by 10:19 a.m. in the London Metal Exchange. Brent oil for April delivery dropped 0.6 percent to $110.52 a barrel on the London-based ICE Futures Exchange.

Limited supplies of oil will support front-month prices near current levels, while longer-dated Brent pries will be “well-anchored” at about $90 a barrel, Goldman said.

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