Goldman Says Go Gold
"Gold remains the preferred near-term long position, with a price target of $2,700 per ounce by early 2025."
Contents: (1200 words)
- Introduction
- A Tactical Shift in Commodity Strategy
- Oil Market Caution
- Delayed Copper Rally
- Strong Bullish Case for Gold
- Risks in Broader Commodity Market
- Conclusion In context of seasonality and BRICS/Election Events
- Short term: 90 Day Horizon
- Intermediate Term: 3 to 6 months
- Longer Term: 2 Years+
- Key Slides
- Final Word: Don’t Judge a Book by it’s Cover
1- Introduction
A brand new report from Goldman Sachs, titled "Go for Gold," is out. The best intro we can give is this audio one sent out yesterday here. Otherwise, here is our full analysis. Bottom Line. Gold is the only game in town for Commodities the next month or so at least. Context matters a great deal this time of year.
2- A Tactical Shift in Commodity Strategy
“The 2024 [Commodity Supply] Deficits Basket is closed with an 8% gain as cyclical support softens.”
The Bank outlines a more cautious approach to commodity investments, reflecting softening cyclical support. While commodities remain essential for portfolio diversification due to their hedging capabilities, particularly against supply disruptions, the analysis indicates a strategic pivot.
Their 2024 Deficits Basket is now closed at an 8% gain. The focus shifts to high-conviction trades, with long positions in gold and short positions in European natural gas. This shift is driven by weakening demand from China and a more challenging macroeconomic environment.
3- Oil Market Caution
"We continue to recommend that oil producers hedge their exposure by buying puts, which still looks relatively cheap."
The report signals a cautious stance on oil, with Goldman revising its Brent crude price forecast to a lower range of $70-85 per barrel. This adjustment stems from stronger-than-expected supply, particularly in the U.S., and a slowdown in Chinese demand.
The analysis suggests that oil prices may experience gentle declines, barring any significant supply shocks. Oil producers are advised to hedge their exposure through put options, given the current market uncertainties.
4- Delayed Copper Rally
"We now see the copper rally materializing post-2025, with a revised target of $10,100 per ton."
Copper's anticipated rally has been delayed, with the Bank adjusting its forecast to post-2025. Despite strong green metals demand, copper inventories in China have built up, contrary to expectations.
The analysis suggests that the expected depletion of copper inventories and the associated price rally will occur later than initially projected. This delay leads to a revised 2025 price target of $10,100 per ton, down from the previous $15,000 expectation.
5- Strong Bullish Case for Gold
"Central bank gold purchases have tripled since mid-2022, driven by fears of U.S. financial sanctions and sovereign debt concerns."
Gold remains the Bank's preferred near-term long position, with a maintained price target of $2,700 per ounce by early 2025. The analysis attributes this bullish outlook to several factors:
- Central bank gold purchases have tripled since mid-2022 due to fears of U.S. financial sanctions and sovereign debt concerns, which are expected to continue.
- Imminent Federal Reserve rate cuts are likely to bring Western capital back into the gold market.
- Gold's value as a hedge against both geopolitical risks and macroeconomic uncertainties is underscored as a compelling reason for maintaining long positions.
Their report suggests that as the U.S. dollar faces potential weakening and global tensions persist, gold's appeal as a safe-haven asset will only strengthen.
- Companion video here (coverage starts 6:20)
