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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|UUP||INVESCO DB US DOLLAR INDEX BULLISH FUND – USD ACC||25.09||+0.09||+0.34%|
|UDN||POWERSHARES DB US DOLLAR BEARISH FUND||21.11||-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%
Precious metals +18%
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.
|GLD||SPDR GOLD SHARES TRUST – EUR ACC||178.83||-1.83||-1.01%|
|SLV||ISHARES SILVER TRUST||22.96||-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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|USO||UNITED 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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