Goldman Expects Negative Return on Commodity Index in 12 Months

Goldman Sachs Group Inc. cut its 12-month forecast for commodity returns, predicting a decline in precious metals, agriculture and energy. The bank kept its neutral recommendation on raw materials.

The Standard & Poor’s GSCI Enhanced Commodity Index will drop 2 percent, compared with an increase of 0.1 percent expected in July, analysts led by New York-based Jeffrey Currie said in a report today. Energy, with a 73.5 percent weighting, will probably fall 1 percent, while precious metals slide 15 percent and agriculture declines 7 percent, they said. Industrial metals may increase 2 percent.

The gauge advanced 2.9 percent this year through Sept. 9 on speculation the U.S. may launch a military strike on Syria in retaliation for what it said was use of chemical weapons. President Barack Obama has since asked Congress to postpone a vote on military action while he pursues a diplomatic solution. JPMorgan Chase & Co. said Sept. 6 it turned overweight on commodities because of an improvement in manufacturing, better demand and more optimism over China.

Investors will probably make more profits buying and rolling front-end futures, rather than purchasing one year out and holding to maturity, the analysts said. “We expect this strong positive carry to offset these declines, leaving returns mostly flat over the next year. Accordingly, we are maintaining our neutral recommendation on commodities.”

West Texas Intermediate crude climbed 17 percent this year to $107.10 a barrel while gold for immediate delivery dropped 18 percent to $1,366.88 an ounce.

To contact the reporter on this story: Chanyaporn Chanjaroen in Singapore at cchanjaroen@bloomberg.net

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net

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