Goldman Sachs: The case for owning commodities has "rarely been stronger"

 
Courtney Goldsmith
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Goldman expects oil to peak at $82.50 a barrel in July (Source: Getty)

The strategic case for investing in commodities has "rarely been stronger" than it is now, according to Goldman Sachs.

In a note published yesterday, Goldman Sachs researchers said commodities are the best performing asset class of 2018.

According to the lender's figures, commodity markets are outperforming equities by eight per cent, with a year-to-date return of seven per cent.

Read more: Aluminium and nickel sent on a rollercoaster ride on Russia sanction fears

"As we have argued since going 'overweight' in 2016, the strategic case for owning commodities has rarely been stronger."

"While commodity returns are volatile... they also offer the best returns for years at a time. We believe the macro backdrop for commodities is as good as we have seen in years, suggesting large allocations to the sector to benefit from such returns," the note said.

Despite this, Goldman Sachs' researchers said investors are still wary of commodities due to a decade of weak performance on commodity indexes, a fear of buying the top and a lack of a structural catalyst like Chinese demand in the 2000s.

"These factors combined with fears of geopolitical premiums embedded in oil and metal prices due to US trade and foreign policy concerns has led to a high level of scepticism and hence an unwillingness to embrace the recent rally."

However, researchers led by Jeffrey Currie, said: "The key is the persistence of the current higher prices, not that prices are likely to trend substantially higher from here like they did in the 2000s."

Goldman forecasts oil to peak at $82.50 a barrel in July and said copper is expected to peak at $8,000 per tonne in December, but it said it sees "significant upside" to its 2019 forecasts.

Read more: Oil prices drop from recent highs despite concerns over Iran sanctions

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