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Goldman Sachs: The case for owning commodities has “rarely been stronger”

Goldman Sachs: The case for owning commodities has “rarely been stronger” thumbnail

The strategic case for investing in commodities has “rarely been stronger” than it is now, according to Goldman Sachs.

In a note published yesterday, Goldman Sachs researchers said commodities are the best performing asset class of 2018.

According to the lender’s figures, commodity markets are outperforming equities by eight per cent, with a year-to-date return of seven per cent.

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

“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,” the note said.

Despite this, Goldman Sachs’ researchers said investors are still wary of commodities due to a decade of weak performance on commodity indexes, a fear of buying the top and a lack of a structural catalyst like Chinese demand in the 2000s.

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

However, researchers led by Jeffrey Currie, said: “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.”

Goldman forecasts oil to peak at $82.50 a barrel in July and said copper is expected to peak at $8,000 per tonne in December, but it said it sees “significant upside” to its 2019 forecasts.

CityAM



7 Comments on "Goldman Sachs: The case for owning commodities has “rarely been stronger”"

  1. Cloggie on Thu, 3rd May 2018 12:53 am 

    Now is the time to buy all the iron ore you can lay your hands on. By the time oil is back at $140, electricity from offshore wind in the North Sea will beat everything else.

    https://www.youtube.com/watch?v=JV9PykR5bHo

    Every 50 years or so you pull the wind tower foundation (monopile) from the sea bed and create a new monopile from the same iron at merely 10% of the energy cost it takes to build one from iron ore. Oh, and scrap metal is already treated in an electric arc furnace, meaning from electricity. In other words, an existing offshore wind energy base can recreate itself.

    Ad infinitum

    https://www.youtube.com/watch?v=DZJAmpt7SbA

  2. Cloggie on Thu, 3rd May 2018 1:06 am 

    Iron ore prices are already low, probable reason: most iron we will ever need is already above the ground and can be recycled indefinitely. Other metals same story.

    Once the traditional car and car industry will die, because of the rise of the publicly owned self-driving car, expect the steel of 1 billion cars to flood the scrap metal markets. Steel wind towers will become very cheap. Iron ore is already historically cheap, because it is being replaced by scrap metal:

    http://markets.businessinsider.com/commodities/historical-prices/iron-ore-price/usd/3.4.2004_3.5.2018

    30 GW planned wind power, that would be ca. 30,000 ton of steel to realize this:

    https://www.youtube.com/watch?v=D08KztwtQYA

    1 billion cars = 1 billion ton of steel.

    Don’t push, there will be enough steel to build all the wind power you will ever need.

  3. Cloggie on Thu, 3rd May 2018 4:42 am 

    Made a mistake…
    5 MW offshore wind turbine is 5000 ton steel.
    1 MW is 1000 ton steel.
    30 GW is 30,000,000 ton steel.
    30 GW is 3,000 turbines of 10 MW.
    Price steel plate ca. €600/ton
    Price steel 30 GW is 18B euro. Can be reused for centuries to come.
    30 GW and capacity factor 0.5 is 15 GW is average electricity consumption Netherlands.
    Total Dutch fossil fuel subsidies is 8B per year.
    15 GW at 10 cent per kWh means an annual fossil fuel bill of 13B euro that will be eliminated.

    Nimitz carrierr is 100,000 ton steel.

  4. Davy on Thu, 3rd May 2018 4:56 am 

    “Nimitz carrierr is 100,000 ton steel.”

    You forgot to mention the lead it packs.

  5. alain le gargasson on Thu, 3rd May 2018 7:30 am 

    Cloggie
    Recycling to infinity is not possible for several reasons:
    · We always have a fire loss, example: case of recycling of beer cans, of the amount recovered only 95% is again available.
    · There are thousands of metal alloys of steel with noble metals niobium, vanadium, tungsten etc, only two classifications in recycling, carbon steel and stainless steel. After melted they do not return in original use, they serve in construction as medium steel.
    · Automotive industry, average of 10 years of life, in recycling, liquid emptying and melting in electric furnace, blending up to 10 alloys of steel, copper of the electric circuit, aluminum of the engine crankcase and burning of plastics.
    · Dispersion use, metallic oxides used as dye in paints (walls, printed matter, plastics, cosmetics, fireworks … etc). The most emblematic case is titanium oxide, white universal colorant (paints, resins, cosmetics, toothpaste …) 95% finish in the dumps, rivers and seas. Nano technology precludes recycling like the silver used in socks to prevent stink feet. Cell phone with more than 40 different elements of mendeleiev table (nano elements).
    · Natural wear: Today for example, on the streets the asphalt contains a greater concentration in platine or palladium than some mines, due the exhaust wear of the automobiles and copper and zinc of the tires.
    · There is no substitute for copper as an electric conductor, nickel for stainless steels, tin for welding, tungsten for cutting metal parts, silver or platinum for chemical and electronic industry, phosphorus for agriculture … etc
    Agriculture: totally disperse, diesel of 100 to 150 l per cultivated ha, limestone in the correction of the agricultural land, fertilizers (NPK -nitrogen, potassium, phosphorus), sanitarian products (herbicides, fungicides, insecticides …) that will end in rivers and in the sea, as well as land due to erosion,
    · Renewable energy, wind turbine 5 MW with a base of 1000t steel and concrete, 250t steel mast, 3 blades of 50t of fiberglass, carbon fiber and plastic resin, motor with permanent magnets, steel alloy with neodymium . Photovoltaic panel, with gallium, indium, selenium, cadmium or tellurium. Today not recyclable.
    · Everything that rotates needs lubricant. 50 million tons / year.

  6. Davy on Thu, 3rd May 2018 7:33 am 

    Great comment Alain!

    More spamming agendist shot down by very capable contributors!

  7. Cloggie on Thu, 3rd May 2018 3:18 pm 

    We always have a fire loss, example: case of recycling of beer cans, of the amount recovered only 95% is again available.

    I gladly give you this irrelevant 5%.

    There are thousands of metal alloys of steel with noble metals niobium, vanadium, tungsten etc, only two classifications in recycling, carbon steel and stainless steel. After melted they do not return in original use, they serve in construction as medium steel.

    Renewable energy, wind turbine 5 MW with a base of 1000t steel and concrete, 250t steel mast, 3 blades of 50t of fiberglass, carbon fiber and plastic resin, motor with permanent magnets, steel alloy with neodymium . Photovoltaic panel, with gallium, indium, selenium, cadmium or tellurium. Today not recyclable.

    When I dive a little in data regarding recycling of steel used in wind towers I encounter nothing that would obstruct recycling of most parts of a wind turbine.

    https://www.sintef.no/globalassets/project/eera-deepwind-2015/presentations/a/a2_van-wingerde_fraunhofer.pdf

    http://orbit.dtu.dk/files/102458629/DTU_INTL_ENERGY_REP_2014_WIND_91_97.pdf

    https://earth911.com/business-policy/wind-turbines-recycle/

    Only rotor blades are currently problematic.

    https://www.steelsustainability.org/recycling

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