Goldman Sachs: "The raw materials sector will benefit from the interest rate cut"

Commodity prices will rise this year as U.S. and European central banks cut interest rates, helping to support industrial and consumer demand, according to Goldman Sachs Group Inc.

Commodities could yield 15% in 2024 as borrowing costs fall, output recovers and geopolitical risks persist, Goldman Sachs analysts including Samantha Dart and Daan Struyven, cited by Bloomberg, say.

The quoted source shows that the price of copper, aluminum, gold and oil producers could increase, and investors must be selective in this context, because the gains will not be universal. Quotations of raw materials registered a modest advance in the first quarter of 2024, with a consolidation observed on the crude oil market, the American investment bank says, recalling that the price of gold reached a record level, and that of copper exceeded the threshold of 9,000 dollars per ton . Monetary policymakers at the US Federal Reserve (Fed) and the European Central Bank (ECB) have signaled their intention to reduce borrowing costs this year as inflation eases. In addition, China signaled additional support for its economic recovery.

"The reduction in interest rates in the US, in a non-recession environment, will lead to an increase in commodity prices, with the biggest boost in the metals segment (copper and gold, in particular), followed by the crude oil market," said the cited analysts, specifying : "Importantly, the positive impact on prices tends to increase over time, as the growth impulse given by more relaxed financial conditions will filter down".

Goldman Sachs' optimistic outlook reflects the views of other market observers. Macquarie Group Ltd. estimated, at the beginning of this month, that commodities are entering a new cyclical growth, helped by tighter supply and a recovery in the global economy. Jeff Currie, former head of commodities research at Goldman Sachs, now a specialist at Carlyle Group LP, predicted gains in commodities as the Fed cuts interest rates. In addition, JPMorgan Chase & Co. highlighted the potential for gold price growth.

Goldman Sachs analysts estimate for the end of the year a price of copper of 10,000 dollars per ton, of aluminum of 2,600 dollars per ton and a quotation of gold of 2,300 dollars an ounce - which would represent a record. Recently, the price of copper approached $8,886 per ton, aluminum - $2,310 per ton on the London Metal Exchange, while the price of gold was around $2,167 per ounce.

"In the medium term, we continue to have a constructive view on gold, supported by the eventual easing of Fed policy, which should crucially reactivate ETF buying," Goldman analysts said, referring to traded fund flows. at the stock market.

Instead - underlining the call for a selective approach -, the bank has weak prospects for metals used in the manufacture of batteries, such as nickel, cobalt and lithium carbonate. "We believe it is too soon for the end of a weaker cycle in these markets," Goldman analysts said.

While the Fed has recently left interest rates unchanged, US central bank officials anticipate three cuts this year. However, the bank will take into account the US inflation indicator, which is to be published.