Please try another search
© Bloomberg. A dump truck transports iron ore at the open pit mine, operated by ArcelorMittal, in Kryvyi Rih, Ukraine, on Wednesday, March 6, 2019. ArcelorMittal has made an offer of 48 billion rupees ($672 million) to buy an Essar Power generation plant in India, outbidding the founding Ruia brothers, according to people with knowledge of the matter. Photographer: Vincent Mundy/Bloomberg
(Bloomberg) -- Commodity prices are heading for their worst week this year. Goldman Sachs Group Inc (NYSE:GS). says, cautiously, that’s an opportunity to buy.
While rising macro concerns and escalating trade tensions have weighed on metals and agriculture prices, those risks are starting to be offset by the return of backwardation and a positive carry, analysts including Sabine Schels said in a May 23 note. The S&P GSCI commodity index is generating positive roll returns for the first time in eight months and the bank is forecasting a 3-month return of 6.1%.
Investor confidence in global economic growth has been crippled by the prolonged trade war between the U.S. and China, hurting commodities from copper to crude oil. The S&P GSCI Enhanced Commodity Total Return Index is down about 4% this week, heading for the biggest loss since December, as the U.S. considers cutting off the flow of vital American technology to five Chinese companies in an escalation of tensions. Goldman cautiously views the recent decline in prices as a buying opportunity.
The bank said it sees an eventual trade deal between the two countries as more likely than not and that would boost demand for cyclical commodities in the second half. Meanwhile, tightening physical supplies for crude oil to live cattle and zinc is creating positive carry for flipping over futures contracts at expiration.
“Zinc backwardation has steepened on sharp inventory drawdowns, even though prices have dropped recently, while the petroleum product markets have tightened on refinery outages,” Goldman said. “Combined with modest near term spot price upside, the risk-reward thus reinforces adding length despite the current macro-induced volatility. This positive energy carry contributes to our expectations of positive commodity returns near-term.”
The base metals sector in particular is cheap again, with copper trading below $6,000 a ton relative to an incentive price of $7,000. Livestock and soft materials also offer value, according to Goldman. Crude and iron ore, which have rallied this year on tight supplies, would require further disruptions for more upside.
(Reuters) - Norway on Friday pledged 1 billion euros ($1.04 billion) to help Ukraine defend itself, support people in need and for reconstruction in the wake of Russia's invasion....
By Lisa Baertlein LOS ANGELES (Reuters) -The union and employers negotiating a new labor contract for more than 22,000 U.S. West Coast port workers said high-stakes talks that are...
By Nichola Groom (Reuters) -President Joe Biden's administration on Friday unveiled a five-year proposal for offshore oil and gas development in areas of existing production, and...
Are you sure you want to block %USER_NAME%?
By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.
%USER_NAME% was successfully added to your Block List
Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.
I feel that this comment is:
Thank You!
Your report has been sent to our moderators for review
Add a Comment
We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:
Enrich the conversation, don’t trash it.
Stay focused and on track. Only post material that’s relevant to the topic being discussed.
Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.
Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.