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Goldman Sachs bullish on commodities for 2023

By Angela Barnes

15:49, 16 December 2022

Global stock market chart illustration
Analysts of the commodities report also shared their views on Russia risks influencing the markets – Photo: Getty

Goldman Sachs has taken a bullish stance on commodities and predicted that it will be the best-performing asset class in 2023 – handing investors returns of 43%.

Brent crude price chart

In the group’s 2023 Commodity Outlook report, strategists also said that the first quarter of the year might be more underwhelming than the rest of it because of expected economic slowdowns. 

However, the investment bank highlighted that the low levels of investment in oil, gas and key metals will help underpin a new supercycle in commodities.

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“Just as commodity markets have been dominated by the dollar in 2022, we expect them to be shaped by underinvestment in 2023. From a fundamental perspective, the setup for most commodities next year is more bullish than it has been at any point since we first highlighted the supercycle in October 2020,” the bank said. 

Goldman Sachs also noted that no supply response is in sight.

“While markets are divesting today, what’s more startling is the lack of investment in commodities for tomorrow. Importantly, the majority of the commodity deflation came from central bankers raising the cost of capital and draining market liquidity, both physically and financially, which is not a long-term fundamental solution.”

The group noted that without sufficient capex to create spare supply capacity, commodities will remain stuck in a state of long run shortages, with higher and more volatile prices. 

“While investors remain concerned with the 2023 growth outlook – a large driver of the latest sell off – the global business cycle is far from over. 

“Our economists argue that global economic growth is set to rebound with China seeing the reopening happening today, Europe improving its energy efficiency in a one-off decline in industrial activity and a slowing of the aggressive Fed rate hikes in the US. These underpin our expectation that commodities (S&P GSCI TR) will return 43% in 2023,” the bank said.

Russia risks remain

Analysts of the report also shared their views on Russia risks influencing the markets.

Oil - Brent

81.89 Price
-2.560% 1D Chg, %
Long position overnight fee 0.0304%
Short position overnight fee -0.0524%
Overnight fee time 21:00 (UTC)
Spread 0.045


2,401.36 Price
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Long position overnight fee -0.0198%
Short position overnight fee 0.0116%
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Spread 1.20


29.25 Price
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Long position overnight fee -0.0202%
Short position overnight fee 0.0120%
Overnight fee time 21:00 (UTC)
Spread 0.050

Oil - Crude

78.74 Price
-2.840% 1D Chg, %
Long position overnight fee 0.0511%
Short position overnight fee -0.0731%
Overnight fee time 21:00 (UTC)
Spread 0.040

“With both European crude sanctions and the price cap finally in place, commodity markets are now in the end game of Russian supply risk in 2022. With gas flows cut across almost all pipelines (bar those through Ukraine), and the grain deal secured for another 100 days, risks have been realised both to the upside (gas) and downside (grains), while the full effect of sanctions on oil are yet to be felt. 

“It is unlikely there will be a formal announcement of counter-sanctions in oil, in our view. Rather, the market will gain increasing visibility about a lack of flows into the new year and beyond as ships divert from their usual transit routes.”

US natural gas price chart 

Impact of China reopening

The report also addressed in more detail what impact China’s reopening might have.

It was noted that when it does relax its Covid stance, it would shift onshore fundamentals more in OPEX commodities - LNG, crude and soybeans - rather than in CAPEX commodities - ferrous, copper and aluminium. 

Furthermore, analysts shared their views on the green transition and highlighted the implementation of both the RePowerEU and the Inflation Reduction Act (IRA) and how they have redefined the renewables outlook for the coming decade in both the EU and US respectively.

China, meanwhile, has also announced a 25% increase in its renewable targets.

“For 2022, we estimate green demand for copper increased to 2.1Mt (7% of global copper demand) and aluminium to 4.1Mt (6% of total demand). Indeed, this is driven by increased strength in solar deployments supported by $470bn investments in renewables this year, which contributed to 1.26Mt of green copper and 1.8Mt of green aluminium demand globally.”

Over the long-term, it was noted that copper could benefit  the most from these policy changes given its higher usage in all clean energy technologies. 

Copper spot price chart

The bank also said in the report that it expects the centre of renewables growth to remain in China.

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