Commodities offer better returns in the long run, says Goldman Sachs
Singapore — Commodities will bring better returns than other assets in the long run, according to Goldman Sachs Group. Strong global demand growth across raw materials reinforces the case for owning them, the bank said in a December 11 report, maintaining its 12-month overweight recommendation on commodities. Goldman sees returns of 10% in 2018, driven by a market structure known as backwardation that’ll lead to a positive roll-yield — when investors sell more-valuable, expiring contracts at the end of each month and buy less-expensive futures to maintain their exposure. The Bloomberg Commodity Index has risen about 6% since the second half of June on signs of tighter supply and stronger demand in everything from crude to cotton and petrol to industrial metals. Unlike forward-looking assets such as equities, which discount future growth, commodities rise as the current levels of demand exceeds the levels of available supply, according to Goldman. The bank sees 15% returns next year ...
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