News Hour- Goldman Sachs sees upside in gold, oil & copper prices

Goldman Sachs said it expected upside in prices of oil, gold and copper this year, citing greater supply risks and stronger fundamentals."We view gold and copper as providing the best value opportunities relative to our view of fundamentals in 2012," the investment bank said on Friday, citing remaining risks of substantial supply shortfalls.Goldman said it continued to expect a rise in oil demand in excess of production capacity gain, despite the slowdown in global economic growth. 

"In our view, it is only a matter of time before inventories and OPEC spare capacity become effectively exhausted, requiring higher oil prices to restrain demand, keeping it in line with available supply," it said. 
The bank said it expected gold prices to continue to rise through 2012, reaching $1,940 per ounce in 12 months, due to the current low level of US real interest rates. 
"We expect US real interest rates to remain lower for longer, given our US economics team's expectation for US economic growth to remain slow through 2012," Goldman added. 
Goldman kept its 12-month return forecast for the S&P GSCI Enhanced Commodity Index of 15 per cent, and its overweight allocation to commodities remained unchanged. 

In another note, investment bank Barclays Capital said more sanctions against Iran could push oil prices well into the $130-140 per barrel range."While the focus of the oil market is the potential closure of the Strait of Hormuz, sanctions can actually have a knock-on impact on underlying balances," it said. 
Tensions over Iran's nuclear programme and a fresh wave of sanctions against it could weigh on oil prices, while signs of improvement of the US and Chinese economy have prompted recent gains, Goldman Sachs said, earlier this week."Confidence is increasing that the impact of the European debt crisis is remaining confined to Europe," analysts David Greely and Stefan Wieler with Goldman Sachs said in a research note. 

"As oil producers and refiners have reacted to the new US sanctions against Iran and prepared for the likely implementation of a European Union embargo of Iranian oil, the escalating tensions between Iran and the West have likely been exerting a near-term negative influence on crude oil prices," the bank said "There is strikingly little evidence that any meaningful 'Iran premium' is being embedded in current crude oil prices." 
Goldman, which has been one of the bulls on oil prices, pointed out that prices could be supported once the EU embargo on Iranian oil takes effect. 
"We would expect European refineries to replace the Iranian crude with Saudi barrels, clearing the current surplus, while China absorbs the surplus of Iranian crude, in part to fill its strategic reserves," the analysts said. 
"However, OPEC spare capacity is quite low, which leaves the market very vulnerable to further supply losses, with the potential for further losses particularly in Iran and Nigeria." 

(Source- http://economictimes.indiatimes.com)