Goldman Sachs Predicts Best Commodity Returns for 2011 in Precious Metals
By Maria Kolesnikova - Dec 13, 2010 5:12 AM PT
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Dec. 13 (Bloomberg) -- Philip Manduca, head of investment at ECU Group Plc, talks about his investment strategy for 2011. He speaks with Andrea Catherwood on Bloomberg Television's "The Pulse." (Source: Bloomberg)
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Precious metals will probably give investors the best returns among commodities in the next year, and livestock the worst, Goldman Sachs Group Inc. said.
Precious metals will advance 28 percent over 12 months and livestock 4 percent, London-based Jeffrey Currie, Allison Nathan and other Goldman analysts said in a report today. The team raised its 12-month forecast for the S&P GSCI Enhanced Total Return Index to 18 percent from 16 percent, mostly because of changes to agricultural estimates.
“Extreme weakness in U.S. demand over the past two years has allowed China to grow unconstrained without any competition for raw materials,” the Goldman analysts said in the report. “This is likely to change in 2011 with a stronger U.S. that is likely to bump up against a China that is consuming dramatically more commodities than pre-crisis.”
Commodity assets under management rose $19 billion to a record $340 billion in October, led by demand for index-linked investments, Barclays Capital said in a report last month. Gold rose 27 percent this year, heading for a 10th consecutive annual advance. Investors are seeking hard assets as governments and central banks led by the Federal Reserve pump more than $2 trillion into the world financial system.
Chinese Demand
Higher commodity prices will be needed to slow U.S. consumption, “to make room for further Chinese demand,” Goldman said. The raw materials most affected will be those with the tightest supply, including crude oil, copper, cotton, soybeans and platinum, the analysts said. The S&P GSCI Enhanced Total Return Index gained 7 percent this year.
Gold will reach $1,690 an ounce in 12 months, from $1,390 now, and probably peak the following year, Goldman estimates. Gold in exchange-traded products backed by the metal reached a record 2,105 metric tons on Oct. 14 and holdings were last at 2,093 tons, according to data compiled by Bloomberg. That’s equal to about nine years of U.S. mine output.
“A low U.S. real interest-rate environment will continue in 2011, particularly given the resumption of quantitative easing measures in the U.S.,” the analysts wrote. “However, as we look toward 2012, we find it timely to reiterate our view that at current price levels gold remains a compelling trade, but not a long-term investment.”
To contact the reporter on this story: Maria Kolesnikova in Moscow at mkolesnikova@bloomberg.net.
To contact the editor responsible for this story: Claudia Carpenter at ccarpenter@bloomberg.net. |
