Written by Sumit Roy  |

February 22, 2012

Market Wrap: Gold ($1776) Spikes To 3-Month High, Brent At 9-Month High As Goldman Says Buy, Platinum Surges

Details

Goldman Sachs sees continued upside in gold and oil.

• Gold and oil surged to fresh multi-month highs today as influential investment bank Goldman Sachs called for continued 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, prices which are well above current levels.
  
  "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.
  
  
• Gold hit a fresh 3-month high and platinum surged to a 5-month high. "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."
  
  Meanwhile, platinum has been benefitting from supply concerns amid a strike at the world's largest mine, as we explained in our latest Precious Metals Monitor.
  
  Gold was last trading higher by $17.68, or 1 percent, to $1776.80/oz, while silver inched higher by $0.03, or 0.09 percent, to $34.35. Platinum surged $40, or 2.37 percent, to $1726.75 and palladium gained $11, or 1.55 percent, to $719.
  
  
• The relentless rally in crude oil prices continued today as traders focused on the potential loss of exports from Iran amid the nuclear row between that country and the rest of the world. Brent was last trading up by $1.23, or 1.01 percent, to $122.89/bbl—a fresh nine-month high— while WTI inched up by $0.02, or 0.2 percent, to $122.89.
  
  "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."
  
  
• Natural gas recovered from earlier losses to trade higher by $0.02, or 0.84 percent, to $2.65/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.
  
  
• Grains rose today ahead of the USDA's crop forecasts later this week. Corn was last trading up by $0.09, or 1.43 percent, to $6.39/bushel, while soybeans traded unchanged at $12.71, and wheat added $0.12, or 1.9 percent, to $6.45.
  
  
• Prices for copper on were unchanged at $3.85/lb on Comex 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."