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Wednesday, 13 June 2012 00:44
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Goldman has a very bullish commodity forecast

The US recovery is likely to grow stronger and, more important, European leaders will come together to cobble a stronger union which will ensure there is no crisis with regard to the debt held by either the sovereigns or their banks … Though Goldman Sachs’ latest forecast of a 41% return on energy investments over the next 12 months (23% in base metals and 18% in precious metals and a 14% fall in agriculture commodity values) is based on analysis of the number of hedge funds with long exposure to US crude futures and options and the movement in prices as this number rises, at the very core of its analysis is the view that all is going to be well with the global economy. In the week ending May 29, the number of hedge funds and other money managers with long positions had fallen to 66, Reuters reports, but according to Goldman if some of the 50 hedge funds who’ve quit their positions over the past three months were to go back to them, this will ensure prices start rising again.

Needless to say, at the moment, not too many others are of the same view. In April, the IMF, for instance, had forecast a 10% increase in oil prices in 2012, followed by a 4% fall in 2013—it forecast a 10.3% contraction in non-fuel commodity prices in 2012 and a further 2.1% fall in 2013. Given how India is suffering from the impact of a sharp fall in the rupee’s value, the last thing it needs is for Goldman’s forecasts on a sharp hike in commodity prices to be right.



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