BackCommodities rise to 2014 high as Goldman maintains bearish view
Goldman Sachs Group says this year's gains will be short-lived; the GSCI Spot Index of 24 commodities gains 0.2%
Premium
New York: Commodities climbed to the highest since December as extreme weather fuelled supply concerns for crops and energy at a time of rising imports by China. Goldman Sachs Group Inc. says this year’s gains will be short-lived.
The Standard and Poor’s GSCI Spot Index of 24 commodities gained 0.2% to settle at 636.22 on Wednesday, after touching 639.93, the highest since 30 December. Coffee led gains, and cocoa reached the highest since 2011. Gold capped the longest rally since June 2012.
The driest January since 1954 seared crops in Brazil, the top sugar and coffee grower, while freezing weather across the US damaged winter wheat and cut energy stockpiles as heating demand rose. China’s imports surged 10% in January, driven by crude oil, iron ore and record shipments of copper, customs data show. Goldman maintained its “underweight’ 12-month recommendation on commodities, as raw materials from gold to copper will see more impact from turmoil in emerging markets, the bank said on Wednesday.
‘‘A drought in Brazil gives rise to supply concerns,’’ Adrian Day, the president of Adrian Day Asset Management in Annapolis, Maryland, who oversees about $150 million, said in a telephone interview. ‘‘It’s logical that sugar and coffee are leading the pack. The Chinese data is more bullish for the world economy.’’
“The GSCI gauge has rebounded this year after last year capping the first annual loss since 2008. China’s economy, the second-largest, may expand 7.6% this year," Helen Zhu, chief China strategist at Goldman Sachs, said on Wednesday. That’s faster than the 7.4% median estimate of economists surveyed by Bloomberg.
Holdings across commodities tracked by the GSCI index rose for a seventh straight session, to the highest since November.
Crude supplies
West Texas Intermediate crude yesterday climbed to the highest since 18 October after inventories at Cushing, Oklahoma, the delivery point for the futures, shrank by 2.67 million barrels last week. Natural gas surged as much as 4.2% on speculation that a blast of cold air drove an unusually large US stockpile decline last week.
Raw-sugar futures jumped as much as 3.1% on ICE Futures US in New York, while arabica coffee futures surged as much as 3.1%.
Gold futures for April delivery gained as much as 0.5% on Wednesday to $1,296.40, the highest since 8 November, as speculation that US stimulus will continue boosted the appeal of alternative assets. Federal Reserve chairman Janet Yellen said this week that while the recovery in the labour market is ‘‘far from complete," stimulus would be cut in “measured steps."
Goldman, Citi
This year’s rebound may be short-lived as banks led by Goldman Sachs and Citigroup Inc. say commodities are heading for losses in 2014. Raw materials from copper and corn to sugar and coffee will have supply surpluses this year after a decade-long bull market spurred producers to build new mines, drill more wells and expand crop planting.
The S&P GSCI Enhanced Commodity Index, Goldman’s preferred measure, will drop 4.3% in the next 12 months, analysts led by Jeffrey Currie said in a report on Wednesday. Declines will be led by a 14% drop for precious metals, while agriculture products will fall 9%, the bank said. Bloomberg
Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!
