The recent rally in gold, oil and iron ore might have buoyed sentiment that commodity prices are finally on the up, but one analyst at Goldman Sachs isn’t so sure.
In a note by Goldman’s (GS) analysts, led by global head of commodities research Jeffrey Currie, the firm warns that the current commodity surge is only temporary, reported CNBC.
Instead, current market views on “reflation, realignment and re-levering have driven a premature surge in commodity prices that we believe is not sustainable,” writes Currie.
Oil prices have been rallying recently, with Brent crude oil prices rising by around 15.6% over the last two weeks after there were signs of producers cutting their output. Iron ore prices rose by around 20% on Monday, and with year-to-date gains of 46%, are the best-performing industrial commodity this year, reported Reuters. Gold prices has been up by about 12.7% over the last six months.
Visualisation of that Record jump in iron ore price. MBIOI-62 at $63.74 (+$9.99) pic.twitter.com/mLrenDtPL7
— Peter Hannah (@PHmetals) March 7, 2016
In Currie’s view, however, any rally is months away, and is highly dependent on a rebalancing within the oil market that curtails worldwide oil production. “Only a real physical deficit can create a sustainable rally,” he said, according to The Wall Street Journal.
Goldman has been previously bearish on oil prices before, most recently in a report in September, where analysts cautioned that oil prices could fall near the $20-per-barrel mark. “The oil market is even more oversupplied than we had expected and we now forecast this surplus to persist in 2016 on further OPEC production growth, resilient non-OPEC supply and slowing demand growth,” the report stated.