Commodities have the best prospects of any asset class in 2023, with a perfect macro backdrop and critically low inventories for nearly all major commodities, according to Goldman Sachs’ head of commodity research.
This year has started with a fall in prices triggered by a warm weather shock and rising interest rates, Jeff Currie said at a presentation in London on Monday. But demand in China is starting to recover and there is not enough investment in supply, meaning the year as a whole will be a “Goldilocks” moment for rising prices, he said.
“You can’t come up with a more bullish mix for commodities,” Currie said. “Supply shortages are evident in every single market you look at, whether it’s inventory levels at critical operating levels or exhausted production capacity.”
Currie sees parallels to the record rise in commodity prices in 2007-08. The only exception, he said, is European natural gas, where inventories appear sufficient to see through this year.
Goldman raised its aluminum price forecasts on Sunday, saying higher demand in Europe and China could cause supply shortages. The bank forecast a multi-year commodity super cycle in late 2020 as years of underinvestment prevent supply from keeping pace with demand.
However, oil got off to a rocky start in 2023, capped by fears of a possible US recession and China’s shaky progress in reopening its economy after COVID-related lockdowns. Traders are also tracking the impact of sanctions on Russian oil and product flows. Brent crude futures were trading near $84 a barrel in London.
‘You can’t come up with a more bullish mix for commodities.’
Jeff Currie, head of commodity research at Goldman Sachs
Natural gas prices in Europe fell to their lowest level since September 2021 on Monday, despite the arrival of a cold snap as liquefied natural gas continued to pour into the continent due to a lack of competition from China, where stockpiles of the fuel are full.
That could change later in the year when a robust recovery in Chinese demand coincides with final rate hikes in major western economies, Currie said.
https://www.smh.com.au/business/markets/2023-will-be-a-goldilocks-year-for-commodities-says-goldman-sachs-20230117-p5cd1s.html?ref=rss&utm_medium=rss&utm_source=rss_business 2023 will be a “Goldilocks” year for commodities, says Goldman Sachs