The Case for Owning Commodities Has “Rarely Been Stronger,” Says Goldman Sachs

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According to Goldman Sachs, the strategic case for investing in commodities has “rarely been stronger” as compared than what it is now.

In a note published that was published last Tuesday, researchers from Goldman Sachs said that commodities are the best performing asset class of this year.

The figures that were released by the lender revealed that commodity markets are outperforming equities by as much as eight percent, with a year-to-date return of seven percent.

The note stated: “As we have argued since going ‘overweight’ in 2016, the strategic case for owning commodities has rarely been stronger.”

It added: “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.”

Despite all of this, the researchers of Goldman Sachs said that investors are still cautious of commodities because of a decade of weak performance on the indexes of commodities, a hesitation of buying the top and an absence of a structural catalyst such as Chinese demand in the 2000s.

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

The researchers were led by Jeffrey Currie. They stated: “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.”

The bank forecasts that oil will peak at $82.50 per barrel in July and said that copper is anticipated to peak at $8,000 per tonne in December. However, it said that it sees “significant upside” to its forecasts for 2019.