Gold (COMEX:GCZ13), iron ore, soybeans and copper will probably drop at least 15% next year as commodities face increased downside risks even as economic growth in the U.S. accelerates, according to Goldman Sachs Group Inc.
The risks are strongest for iron ore and follow increases in supplies, analysts including Jeffrey Currie wrote in a report yesterday that identified the New York-based bank’s top 10 market themes for the coming year. Price pressures will mostly become visible later in 2014, the analysts wrote, forecasting that bullion, copper and soybeans will decline to the lowest levels since 2010.
Commodities tracked by the Standard & Poor’s GSCI Index lost 4.7% this year, led by corn as supplies surged, and precious metals on expectations the Federal Reserve will taper stimulus. Goldman described the forecast losses for iron ore, gold, soybeans and copper as significant, and said that they could help weaken currencies in producing countries, including the Australian dollar and South African rand.
“Last year, we pointed to the ongoing shift in our commodity views, ultimately towards downside price risk,” the analysts including Currie wrote. “The impact of supply responses to the period of extraordinary price pressure continues to flow through the system.”
Gold, which was at $1,244.80 an ounce on the Comex at 8:51 a.m. in New York, will drop $1,050 at the end of next year, Goldman said in the report, restating an earlier forecast. Currie said last month that gold is a “slam dunk” sell for next year as the U.S. economy extends its recovery.
Bullion is headed for the first drop since 2000 this year as investors cut holdings. Futures lost as much as 2.6% yesterday after the Fed signaled that tapering may start in the months ahead, according to minutes from its October meeting. Lower gold prices would alleviate concern about inflation and current account deficits in emerging markets such as Turkey and India, it said.
Soybeans are seen by Goldman at $9.50 a bushel by the end of 2014, from $12.845 in Chicago today, while corn will retreat to $3.75 a bushel from $4.2725. Copper will drop to $6,200 a ton from $6,968 on the London Metal Exchange.
A global seaborne iron ore surplus will emerge next year as supply increases over the second and third quarters, Goldman Sachs said in a separate report last month. Prices will average $108 a ton in 2014, it said in the Oct. 18 note. The raw material averaged $135 this year at Tianjin port in China.
While downside risks for energy prices will increase next year, the outlook is more stable than for iron ore, gold and copper, Goldman said in yesterday’s report. Brent crude is seen at $105 a barrel at the end of 2014 from $108.31 today.
“We expect the long-awaited shift towards above-trend growth in the U.S. finally to occur, spurred by an acceleration in private consumption and business investment,” the Goldman analysts wrote yesterday. At the Fed, “we expect a gradual tapering in bond purchases to begin, most likely in March.”
The U.S. economy may expand 2.6% in 2014 from 1.7% growth this year, according to the median of analysts’ estimates compiled by Bloomberg. Retail sales climbed in October by the most in three months, data showed yesterday.
In China, the largest consumer of everything from iron ore to copper, economic growth is seen as stable this year after a slowdown in mid-2013 reversed, Goldman said. The preliminary reading released today of a Chinese Purchasing Managers’ Index for November was 50.4, the first decline in four months for the gauge from HSBC Holdings Plc and Markit Economics.