Technical Analysis

Goldman Sachs on oil – says China reopening is a “game changer”. Also like gold.


A note from Goldman Sachs on commodities has a very bullish outlook.

Analysts at the bank say commodities will show “superior total returns” through this year, citing economic “macro and micro dynamics re-aligning again”, low inventories.

On Oil:

  • Over a 12-month period, the bank forecast returns of 46.9% from energy, 29.6% from industrial metals and 5.7% from precious metals
  • “Oil markets are not pricing the expected uplift in demand combined with the downturn in Russian production”
  • “China’s reopening is a game-changer”
  • “Commodities like crude oil, refined petroleum products, LNG, and soybeans are particularly set to benefit from China’s demand tailwind”
  • over the next 12 months GS sees energy returns of around 47%
  • expectations of smaller rate hikes from the U.S. Fed will contribute to strong commodity demand

Also like gold:

  • “While central bank tightening and the USD have been macro headwinds for commodities in second half of 2022, we believe a sustained inflection in the USD provides an ingredient for a fairly significant upside in commodities”
  • Gold, in particular, is likely to be on a cusp of sustained upside as de-dollarisation is very bullish gold
  • at a time that the Fed is likely to increasingly shift towards growth concerns slowing its rate hike path allowing ETF holdings to stabilise

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