Commodities bull market is coming: Goldman Sachs

The firm forecasts the S&P Goldman Sachs Commodities Index will surge 28% over the next 12 months

Commodities are on the cusp of entering a structural bull market thanks in part to a weakening U.S. dollar and rising inflation risks, according to Goldman Sachs Group.

Ticker Security Last Change Change %
UUP INVESCO DB US DOLLAR INDEX BULLISH FUND - USD ACC 24.55 +0.20 +0.82%
UDN POWERSHARES DB US DOLLAR BEARISH FUND 21.36 -0.18 -0.85%

The firm forecasts the S&P Goldman Sachs Commodities Index will surge 28% over the next 12 months, led by energy (+43%) and precious metals (+18%). Agriculture (-0.8%) is the complex within the commodities space where a drop in prices is expected to occur.

The bull market will be driven by structural under-investment in the old economy, policy-driven demand and tailwinds from a weakening dollar and rising inflation risks, wrote analysts led by Jeffrey Currie.

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“These drivers remain consistent with our bullish views from the start of this year, and have now been intensified by COVID-19 disruption and the subsequent global policy response,” they said.

Tighter inventories across almost all of the major commodities, many of which are in a deficit, means that barring a collapse in demand, markets are likely to continue rebalancing even if there is another wave of COVID-19 infections.

Ticker Security Last Change Change %
GLD SPDR GOLD SHARES TRUST - EUR ACC 171.11 -2.94 -1.69%
SLV ISHARES SILVER TRUST 25.26 -0.39 -1.52%

Goldman sees gold climbing to $2,300 an ounce next year and silver reaching $30, good for gains of 19% apiece.

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Ticker Security Last Change Change %
USO UNITED STATES OIL FUND L.P. 48.75 -0.23 -0.47%

West Texas Intermediate crude oil, meanwhile, is expected to rally 36% to $55.90 per barrel. With inventories remaining high, the firm believes prices will begin to gain momentum “after winter.”