Market Nuggets: Goldman Near-Term 'Overweight' On Commodities; Favors Petroleum, Copper

Monday March 11, 2013 8:52 AM

Goldman Sachs says it is shifting to a near-term "overweight" position in commodities on a view that a recent sell-off was overdone. However, the bank says it retains a 12-month neutral recommendation. Goldman says its stronger near-term view is driven by petroleum and copper. "Petroleum's strong near-term fundamentals, owing to a combination of limited spare OPEC capacities and solid EM (emerging-market) demand growth, will continue to lend support to a backwardation for Brent and key product markets and help generate a positive rolling yield," Goldman says. "Expected pipeline debottlenecking in the U.S. in 2Q13 will also support higher WTI (West Texas Intermediate) prices during the summer. In copper, where we feel the pullback driven by Chinese concerns was particularly excessive and feel strongly about the upside potential, we recently updated our trading recommendations with a new long in the Sep-13 contract. Driving this level of conviction and our 6-month target of $9,000/mt is our view that Chinese metals demand will rise during 2Q13 both seasonally and on the back of continued growth in construction completions from the previous construction boom, property sales and power infrastructure-related demand." As for gold, the bank lists a near-term target of $1,615 an ounce, but lists a 12-month target of $1,550.

By Allen Sykora of Kitco News; asykora@kitco.com