Commodity Price Forecast: 15% Returns Expected This Year

[Goldman Sachs predicts: U.S. and European interest rate cuts may push commodity returns to 15% this year, gold hits $2,300]

Goldman Sachs said commodity prices will rise this year as interest rate cuts from the Federal Reserve and the European Central Bank help support industrial and consumer demand. Goldman Sachs expects copper to rise to $10,000 per ton, aluminum to $2,600 per ton, and gold to $2,300 per ounce by the end of the year.

Goldman Sachs analysts including Samantha Dart and Daan Struyven said in a March 24 report that raw material prices could rebound by 15% in 2024 as borrowing costs fall, manufacturing recovers and geopolitical risks persist. Copper, aluminum, gold and petroleum product prices are likely to climb, the bank said. The bank also stressed that investors need to be selective as gains are not universal.

Commodity prices rose in the first quarter, with crude oil prices strengthening, gold prices hitting record highs, and copper prices exceeding $9,000 per ton. Policymakers at the Federal Reserve and the European Central Bank have signaled their intention to lower borrowing costs this year as inflation recedes. In addition, China has stated that it will further support economic recovery.

“We find that U.S. interest rate cuts in a non-recessionary environment lead to higher commodity prices, with the biggest boost to metals (particularly copper and gold), followed by crude oil,” the analysts said. “Importantly, as more The positive impact on prices tends to grow over time as the boost from looser financial conditions emerges gradually."

Goldman's cautiously optimistic outlook echoes that of other market watchers. Macquarie said earlier this month that commodity prices were entering a new round of cyclical gains, driven by tighter supplies and an improving global economy. Jeff Currie, the former head of commodities research at Goldman Sachs and now at Carlyle Group, also predicted that commodity prices will rise as the Federal Reserve cuts interest rates. Additionally, JPMorgan highlighted gold’s upside potential.

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