Goldman: Inflation Risk To Fuel Bull Market For Gold, Oil

(October 22, 2020 - Newsmax Finance Staff)

Goldman Sachs reportedly is forecasting a bull market for commodities in 2021 based on its outlook for a weaker dollar, inflation, and the prospect of further economic and fiscal stimulus.

Analysts at the bank on Thursday predicted a 12-month return of 30% on the S&P’s Goldman Sachs Commodities Index, recommending long positions on silver, copper, gold, U.S. gas, Brent crude and jet regrade, CNBC.com said.

Goldman expects base metals and agriculture to have “more near-term upside than oil, with smaller inventories to move through before prices begin to rise.”

“Given that inventories are drawing this early in the cycle, we see a structural bull market for commodities emerging in 2021,” analysts led by head of commodities research Jeffrey Currie said in a research note.

“We see trends in rising social need, alongside investor complacency over inflation, as raising the political risks of policy with an inflationary bias,” the analysts wrote. “Accordingly, we expect an increased rotation into commodities as an inflation hedge.”

Gold is seen as one of those hedges, and has seen its price shoot up by 26% this year. Goldman expects the metal to average a price of $2,300 per ounce in 2021, up from its predicted average of $1,836 per ounce this year.

Although Democratic House of Representatives Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin are working out details of a new relief package, a deal is unlikely before the Nov. 3 presidential election amid stiff opposition in the Republican-controlled Senate, Reuters said.

With funding depleted, businesses, especially in the transportation industry, are either laying off or furloughing workers as demand remains subdued. More pain lies ahead amid a resurgence in new coronavirus cases around the country, which could lead to state and local government restrictions or more people shunning establishments like restaurants and bars.

The slow and uneven recovery from the worst economic downturn in at least 73 years and uncontrolled coronavirus crisis could cost Republican President Donald Trump a second four-year term in the White House when Americans vote on Nov. 3. Trump is trailing former Vice President and Democratic Party candidate Joe Biden in national opinion polls.

"There are still millions and millions on the nation's unemployment rolls because many of the jobs lost during the steepest downturn in economic history have not yet returned," said Chris Rupkey, chief economist at MUFG in New York. "Time will tell if the still-record number of people out of work will act as a brake on the economic recovery or whether the economy's fortunes depend more on the course of the virus."