Analysts at Goldman Sachs continue to recommend owning commodities even though the asset class continues to suffer from the biggest slump in eight months.
According to Bloomberg's Commodity Index, a gauge of the performance of raw materials, fell more than 3 percent last week which marks the biggest decline since July. But the Bloomberg report cited Goldman's Jeffrey Currie, who thinks the rout in commodities, which attributed concerns of a slowdown in China are overblown.
The analyst suggested that demand for commodities in China, particularly oil and nickel, are actually rising. Meanwhile, near-term contracts for oil and copper are strengthening relative to futures with further out dates, which signals that underlying market fundamentals are strong.
"What gives us confidence in tighter forward commodity markets despite this past week's sell was that it was mostly time-spread neutral across the commodity complex," Bloomberg quoted the analyst as writing in a research report. "In fact, front end WTI time-spreads strengthened into Thursday and Friday's flat price weakness. If the sell-off was driven by fundamental weakness, timespreads would have weakened."
Currie sees WTI oil trading at $57.50 in the second quarter and copper will trade at $6,200 a metric ton on the London Metal Exchange.
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