Goldman Sachs Predicts Surge in Commodity Prices as Central Banks Slash Rates

Goldman Sachs Group is predicting a surge in commodity prices in 2024 as central banks across the United States and Europe work to reduce interest rates in their respective countries that would likely support both consumer and industrial demand. According to a March 24, 2024, note, raw materials could see a return of up to 15% through the year as the cost of debt reduces, the manufacturing sector starts to recover and global geopolitical risks with the potential to affect commodity prices persist.

Several Goldman analysts, including Daan Struyven and Samantha Dart, believe that oil, gold, aluminum and copper products may see a rise in prices. But the analysts warned investors to be selective with their investments as the commodities’ gains would not be universal.

The first quarter of the year saw commodities make a modest advance as crude oil prices strengthened, copper reached more than $9,000 per ton and gold prices hit record levels.

European Central Bank and U.S. Federal Reserve policymakers have also stated their intent to cut borrowing costs in 2024 amid falling inflation levels while China’s recovery has flagged more support.

The analysts note that American interest rate cuts in “nonrecessionary environments” often result in higher prices for commodities, with metals such as gold and copper experiencing the largest price boost. Furthermore, they said that this positive effect on prices, especially in the metals segment, increases over time, thanks to the growth impulse induced by looser financial conditions.

Goldman Sachs isn’t the only financial institution with a cautiously bullish outlook on the commodities markets. With commodities experiencing an upswing thanks to tighter product supplies coupled with a recovering global economy, other players such as Macquarie Group Ltd are also optimistic about the future of commodities, especially with the U.S. Federal Reserve expected to cut interest rates.

JPMorgan Chase & Co. has also indicated the potential of a surge in gold prices this year, thanks to favorable market conditions. Year-end forecasts from Goldman Sachs put aluminum prices at $2,600 per ton, copper at $10,000 per ton and gold at $2,300 per ounce. On the other hand, gold bullion prices nearly reached $2,167 per ounce while the base metals at the London Metal Exchange held steady at $2,310 and $8,886 per ton.

Goldman Sachs analysts said they would maintain a constructive view of gold in the midterm as the Fed will inevitably ease its monetary policy, potentially resulting in renewed buying in the mostly dormant ETF space.

Mineral exploration companies such as Arizona Metals Corp. (TSX: AMC) (OTCQX: AZMCF) are likely to be banking on future increases in the current prices of commodities because they invest in taking prospective mines to the production phase.

NOTE TO INVESTORS: The latest news and updates relating to Arizona Metals Corp. (TSX: AMC) (OTCQX: AZMCF) are available in the company’s newsroom at https://ibn.fm/AZMCF

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