(Reuters) - Goldman Sachs (NYSE:GS) said a stronger dollar is unlikely to derail its bullish view on commodities, which are likely to find support from physical shortages.
The dollar has been lifted by a stronger-than-expected U.S. economy, the world's largest, and that's a positive sign for global growth, the U.S. investment bank said.
The U.S. dollar index (DXY) has lost more than 1 percent this week, but this follows months of strong demand over U.S.-China trade-related tensions, as investors bet the greenback would gain at the expense of riskier currencies. [USD/]
"The risk aversion this summer created significant emerging market destocking, particularly in China, as consumers attempted to avoid a strong dollar and tariffs by liquidating inventories," Goldman said in a note dated on Thursday.
A stronger greenback makes the purchase of dollar-denominated international commodities more expensive for holders of other currencies, making buyers and users more likely to draw on any stored materials in preference to imports.
"This liquidation, however, has a physical limit with Chinese destocking having already created significant increases in physical (premiums) for oil and metals – a sign of physical shortages."
Going forward, oil had a strong fundamental outlook helped by U.S. demand growth, supply losses and disruptions, and still constrained U.S. shale output, Goldman said.
The bank said its near-term Brent crude oil price (LCOc1) target remained at $80 a barrel.
The bank said it was moderating its bullish view for gold due to a sell-off in emerging markets, and it lowered its 12-month price forecast for the metal to $1,325 per ounce, down from $1,450 and ounce earlier.