London: Commodities may have “explosive rallies” in the next couple of years, with crude oil rising to $175 (Rs7,088) a barrel, according to Goldman Sachs Group Inc.
Political decisions on money flows, labour and technology are “substantially constraining supply growth” of commodities, Goldman analysts including Jeffrey Currie in London wrote in a report on Friday. “This will likely support the ongoing structural bull market in commodities until these policy-driven investment constraints are removed and/or demand is adjusted.”
Commodities are in their seventh year of gains as underinvestment in refineries, mines and land sent prices for oil, gold, platinum and wheat to records. Oil rose to a record $111 a barrel on Thursday.
Crude at $175 a barrel “represents the price level required to maintain trend economic growth against our anaemic supply growth forecasts, assuming growth in the US re-accelerates early next year,” Goldman said.