Commodities bull market is coming: Goldman Sachs

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Commodities are on the cusp of entering a structural bull market thanks in part to a weakening U.S. dollar and rising inflation risks, according to Goldman Sachs Group.

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TickerSecurityLastChangeChange %
UUPINVESCO DB US DOLLAR INDEX BULLISH FUND – USD ACC25.09+0.09+0.34%
UDNPOWERSHARES DB US DOLLAR BEARISH FUND21.11-0.09-0.40%

The firm forecasts the S&P Goldman Sachs Commodities Index will surge 28% over the next 12 months, led by energy (+43%) and precious metals (+18%). Agriculture (-0.8%) is the complex within the commodities space where a drop in prices is expected to occur.

S&P Goldman Sachs Commodities Index 12-Month Forecast

Overall Index: +28%

Energy:  +43%

Precious metals +18%

Agriculture -0.8%

The bull market will be driven by structural under-investment in the old economy, policy-driven demand and tailwinds from a weakening dollar and rising inflation risks, wrote analysts led by Jeffrey Currie.

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“These drivers remain consistent with our bullish views from the start of this year, and have now been intensified by COVID-19 disruption and the subsequent global policy response,” they said.

Tighter inventories across almost all of the major commodities, many of which are in a deficit, means that barring a collapse in demand, markets are likely to continue rebalancing even if there is another wave of COVID-19 infections.

TickerSecurityLastChangeChange %
GLDSPDR GOLD SHARES TRUST – EUR ACC178.83-1.83-1.01%
SLVISHARES SILVER TRUST22.96-0.33-1.42%

Goldman sees gold climbing to $2,300 an ounce next year and silver reaching $30, good for gains of 19% apiece.

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TickerSecurityLastChangeChange %
USOUNITED STATES OIL FUND L.P.28.51+0.41+1.46%

West Texas Intermediate crude oil, meanwhile, is expected to rally 36% to $55.90 per barrel. With inventories remaining high, the firm believes prices will begin to gain momentum “after winter.”

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