Goldman Sachs: Commodities supercycle to continue despite banking crisis

Commodity markets have been rather choppy in recent weeks as has been the case in other financial markets. On the one hand, wheat is one of the commodities that have recorded a steady downtrend in 2023. Despite the persistent Russia-Ukraine war, supply concerns, and steady demand, wheat price has been on a strong downward trend in recent months. Crude oil price has also been on a decline while safe havens like gold have recorded a strong rally in recent sessions.

Even with the divergence in the commodities market, Goldman Sachs has maintained its forecast that a ‘commodities super cycle’ will continue for years. During the Financial Times Commodities Global Summit on Tuesday, the investment bank’s global head of commodities, Jeff Currie stated that China and underinvestment in the energy sector will be key drivers of the rallying.

Commodities price forecast

With regard to crude oil price, the analyst stated, “As losses mounted, it spilled into commodities. Historically, when you have this kind of scarring event, it takes months to get capital back… We will still get a deficit by June and it will drive oil prices higher”.

Similarly, Jeff Currie remains highly bullish on copper. About two months ago, COMEX copper futures rallied to a level last recorded in June 2022 at $4.35 per pound. However, it has since dropped by over 7%.

Despite the decline, Currie has stated, “On copper, the forward outlook is extraordinarily positive. We’ll be at the lowest observable inventories that have ever been recorded at 125,000 tonnes. We have peak supply occurring in 2024…” In the short term, the investment bank forecasts that copper price will reach $10,500 per tonne with $15,000 being their long term prediction.

Notably, major commodities traders like Trafigura concur with Currie’s predictions. In the short term, the market sentiment may continue to weigh on this class of assets. However, the banking crisis will have a limited impact on metals and energy markets.

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