Goldman Sachs Group Inc. cut its three-month outlook on commodities to neutral from overweight, saying that most raw materials reached targets after gaining and economic growth may soften in the next quarter.
Over 12 months, commodities may return 10 percent, analysts led by Jeffrey Currie said in a report today, sticking with an overweight recommendation for the one-year period. That’s the second change this year in forecast returns over that timeframe, from 12 percent on Feb. 22 and an initial call of 15 percent.
While commodities as tracked by the Standard & Poor’s GSCI Spot Index have climbed 8.6 percent this quarter, they are down 0.5 percent this month amid speculation that growth in China may slow. The Asian nation, the U.S. economy and tension in the Middle East are three key risks to commodities, Goldman said.
“The macro environment is likely to soften in the second quarter with few near-term upside catalysts other than increased tensions in the Middle East,” Goldman said. West Texas crude and gold futures may rally further, the analysts said, retaining 12-month forecasts of $123.50 a barrel and $1,940 an ounce.
Brent crude rallied 16 percent this year to $124.38 a barrel at 5:32 p.m. in Singapore, peaking at $128.40 on March 1. That exceeded Goldman’s three and 12-month targets as supply concerns from Iran to Sudan boosted prices. Copper on the London Metal Exchange gained 11 percent, and traded as high as $8,765 a metric ton, compared with Goldman’s three-month target of $8,400.
An index of leading indicators in China rose to a slower pace in February than a month earlier, adding to evidence of moderating growth in the world’s largest user of energy, metals and grains.
Slowing economic growth in the country “was policy driven and was aimed at the construction sector,” Goldman said in the e-mailed report. “It has had a much larger impact on metals demand than on energy.”
Goldman reiterated a recommendation to buy New York-traded WTI futures for September delivery, a call first made Feb. 22. It also said to continue to sell the May-to-June timespread on WTI, the U.S. benchmark grade, according to the report. Most-traded crude futures in New York fell 0.8 percent to $106.49.
Consumer confidence in the U.S., second to China in terms of raw-material usage, stood at 70.2 in March, close to the highest level in a year, the New York-based Conference Board said yesterday. Another report showed U.S. home prices dropped at a slower pace in January, signaling stabilization in the housing market where copper and steel are used.
Gold futures on Comex have gained 7.2 percent in the quarter to date, and stood at $1,679.50 an ounce. Prices will rise further on another round of stimulus from the U.S. Federal Reserve, Goldman said.
“Our U.S. economists forecast subdued growth and further easing by the Fed in 2012,” Goldman said in the report. “We reiterate our constructive outlook for gold prices.”