Goldman Still Bearish On Commodities, Except For Zinc

In a new report, analysts at Goldman Sachs analysts explained their bearish outlook for commodity prices over the next year. While most commodity prices have been on the rise since March, analysts believe that the rally will be short-lived.

Price Pressures Intensify

According to the report, commodity prices will continue to be weighed down by a stronger dollar, low oil prices and softening Chinese construction demand. “The recent rise in commodity prices is clearly at odds with our lower-for-longer bearish view across the complex,” analysts explain in the report.

Copper Hit Hardest

The report singles out copper as the commodity that will be hit hardest by weak Chinese demand and a strong dollar. Goldman is calling for copper prices to fall to $5,200 per metric ton in the next 12 months. The iPath Bloomberg Copper SubTR ETN JJC is up more than 6.6 percent in the past three months but remains down 13.0 percent in the past year.

Related Link: Goldman Sachs: S&P Will Hit 2150 By August

Lingering Oil Oversupply

The U.S. oil market will continue to be oversupplied through 2016, as falling rig counts are not enough to offset increasing production efficiency. More than half of the U.S. rigs have been shut down in the past year, but oil prices remain 43 percent below last year’s levels. The United States Oil Fund ETF USO is down 47.0 percent in that time.

Lone Exception

According to the report, Goldman’s one exception to its bearish commodities outlook is zinc. Analysts mention zinc’s high exposure to China’s infrastructure and automotive industry, its lack of exposure to the dollar and the closing of the Century and Lisheen zinc mines as catalysts for the metal.

Goldman’s 12-month projection for zinc prices is $2,500 per ton.