Goldman Sachs Group Inc. pared its 12-month commodity return forecast to almost flat after oil rallied, keeping a neutral recommendation on raw materials while predicting losses for gold and gains for base metals.
The Standard & Poor’s GSCI Enhanced Commodity Index will return 0.1 percent over the period, the New York-based bank said in a report dated yesterday. That compares with a forecast gain of 2.3 percent over 12 months in a report on June 12.
The so-called strategic case for holding commodities remains strong, partly because raw materials are a hedge against geopolitical risks, analysts led by Jeffrey Currie wrote in the report. Commodities as tracked by the enhanced index advanced to the highest level since February last week as West Texas Intermediate crude oil traded at the highest price in 16 months.
“Our current outlook is extremely benign with returns expected to be mostly flat over the next 12 months,” the Goldman analysts wrote. Precious metals and agricultural commodities may drop 8 percent over the period, while base metals advance 6 percent, the bank said.
Crude in New York rallied 11 percent this month through yesterday, and settled at $108.05 a barrel July 19, the highest since March 2012. Political upheaval in Egypt spurred concern that unrest may spread, potentially disrupting shipments from the Middle East. The U.S., the largest oil consumer, also showed signs of recovery, helping to boost prices as inventories fell. WTI traded at $106.89 a barrel today.
The neutral recommendation from Goldman contrasts with the position from UBS AG, Switzerland’s largest bank, which rated commodities as underweight, according to a report on July 2. Slow economic growth in the U.S. will boost equities more than raw materials, according to UBS, which is bearish on gold.
Bullion is heading for the first annual drop in 13 years amid speculation the U.S. Federal Reserve will rein in stimulus as the largest economy improves. Chairman Ben S. Bernanke will trim monthly bond buying to $65 billion in September from $85 billion, according to economists surveyed by Bloomberg.
Gold in New York may decline to $1,050 an ounce at the end of 2014, Goldman said, restating a forecast from June 24. Gold for December delivery traded at $1,335.60 an ounce today. Most-active prices have declined 2 percent in 2013.
Corn will decline this half as increased U.S. acreage boosts output, bolstering reserves, said Goldman. The 12-month estimate is $4.75 a bushel, 1.6 percent lower than today. Prices have retreated 31 percent this year.