Written by Sumit Roy  |

February 22, 2012

Morning Call: Goldman Sachs Calls For $1940/oz Gold & $127.50/bbl Brent; Platinum Hits 5-Month High

Details

Goldman Sachs forecasts much higher prices for crude oil and gold.

IN TODAY'S HEADLINES...

• The rally in oil and gold is pausing today, but analysts at the influential investment bank Goldman Sachs sees more outperformance in the two commodities going forward. The investment bank maintained its price forecasts of $127.50/bbl for Brent and $1940/oz for gold.
  
  "With much of the 'value' opportunities behind us, we look to fundamental drivers for further expected gains in 2012, which we believe will be centered in the oil complex," said Goldman. The firm cited low OPEC spare capacity and geopolitical concerns centered on Iran as the underpinnings of its bullish view.
  
  Goldman is not very sanguine about China, however. "Chinese construction activity and consumer appliance output remain relatively weak," it said. In turn, the bank sees much more limited upside in industrial metals such as copper and aluminum.
  
  Finally, analysts at Goldman forecast lower prices in corn and wheat prices going forward, while soybeans may rally just slightly.
  Goldman Lowers Commodity Return Forecast
  
• Precious metals are mixed as gold and silver take a breather after Tuesday's rally, while platinum and palladium continue to surge.
  
  "We expect U.S. real interest rates to remain lower for longer given out U.S. economics team's expectation for U.S. economic growth to remain slow through 2012," said Goldman Sachs. "Consequently, we expect gold prices to continue to rise through 2012, reaching $1940/oz in 12 months, and we continue to recommend a long gold position."
  
  The yellow metal was last trading lower by $3.60, or 0.2 percent, to $1755.52, while silver shed $0.20, or 0.59 percent, to $34.11. Platinum gained $10.75, or 0.64 percent, to $1697.50 after reaching $1709.75 earlier—the highest level in five months. Meanwhile, palladium rose by $3.17, or 0.45 percent, to $713.17.
  Gold eases as optimism over Greek bailout dissipates
  
• Crude oil is down fractionally from nine-month highs as traders take profits after a blistering run amid concerns about Iranian exports. Brent was last trading lower by $0.04, or 0.03 percent, to $121.62/bbl, while WTI shed $0.35, or 0.33 percent, to $105.90.
  
  "There's relatively little responsiveness to negative data, and there is not a huge appetite to take a bearish stance," said Nick MacGregor, an oil analyst at Redmayne Bentley. "There's an underlying sense that between the geopolitical concern and the potential for a resurgent U.S. economy, data would have to be pretty grotty to have a marked impact."
  Oil retreats, dragged by weak Europe economy data
  
• Natural gas is little changed as prices continue to consolidate. The fuel was last trading down by $0.02, or 0.65 percent, to $2.61/mmbtu. Weather forecasts remain bearish, with warmer-than-normal temperatures forecast for the major consumption regions of the United States for the next two week period.
  Chesapeake Profit Rises as Shift From Gas to Oil Pays Off
  
  
• Modest selling pressure is hitting grains ahead of the USDA's crop forecasts later this week. Corn was last trading down by $0.02, or 0.36 percent, to $6.27/bushel, while soybeans shed $0.05, or 0.37 percent, to $12.66, and wheat lost $0.03, or 0.43 percent, to $6.30.
  Russian Seeks 'Foothold' in Asian Wheat Market, Challenging U.S., Australia
  
  
• Prices for copper on Comex are falling by $0.04, or 1 percent, to $3.80/lb today.
  
  "Copper prices are likely to remain rangebound in the short term, before we see any improvement in demand," said a Shanghai-based trader. "But in the medium term, copper has a chance to break higher, with seasonal demand picking up and liquidity in China increasing."
  Copper falls on demand concerns, China data
  
  

What to Watch For:

10:00 a.m. EST: Existing Home Sales