Nickel and palladium are set to outperform iron ore and soybeans as supply outlooks for commodities diverge amid a tentative acceleration in global economic growth, according to Goldman Sachs Group Inc.
The bank kept its 12-month recommendation for commodities at neutral, analysts including Jeffrey Currie wrote in a report dated yesterday. They expect the total return for the Standard & Poor’s GSCI Enhanced Commodity Index to be 0.1 percent in 12 months helped by positive roll yields.
Citigroup Inc. said last month that interest is returning to the asset class as Societe Generale SA called commodities a “really mixed bag” across the sectors. Raw materials are already trading independently, with a ban on ore exports from Indonesia spurring a rally in nickel, while expectations for a deepening global glut have sent iron ore into a bear market.
“While cyclical recovery tends to see rising commodity demand, prices will likely largely be determined by more structural supply factors,” the Goldman Sachs analysts wrote. “Accordingly, not all boats are expected rise with the tide created by continued improvement in global macroeconomic data.”
Commodities as measured by the enhanced index added 2.4 percent this year as global equities increased 5.6 percent and the Bloomberg U.S. Treasury Bond Index rose 3.5 percent. Shortages are seen nickel, zinc, aluminum and palladium, while most other raw materials including copper, iron ore, oil and soybeans, are expected to be in surplus, Goldman says. Nickel fell 1.2 percent today and palladium advanced 0.4 percent.
Increasing Allocations
“We’ve seen increasing allocations from asset managers this year and some new fund interest come into commodities,” Aakash Doshi, a Citigroup Global Markets vice president in New York, said in a phone interview June 24. “We’ve seen geopolitics and weather really come to the fore this year.”
Societe Generale is overweight agriculture, and energy to a slightly lesser extent, and massively underweight precious metals, according to Michael Haigh, head of commodities research, in a June 17 interview.
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