Precious Metals to Lead Commodity Returns in 2011, Goldman Sachs Predicts

Precious metals will probably give investors the best returns among commodities in the next year, and livestock the worst, Goldman Sachs Group Inc. said.

Precious metals will advance 28 percent over 12 months and livestock 4 percent, London-based Jeffrey Currie, Allison Nathan and other Goldman analysts said in a report today. The team raised its 12-month forecast for the S&P GSCI Enhanced Total Return Index to 18 percent from 16 percent, mostly because of changes to agricultural estimates.
“Extreme weakness in U.S. demand over the past two years has allowed China to grow unconstrained without any competition for raw materials,” the Goldman analysts said in the report. “This is likely to change in 2011 with a stronger U.S. that is likely to bump up against a China that is consuming dramatically more commodities than pre-crisis.”
Commodity assets under management rose $19 billion to a record $340 billion in October, led by demand for index-linked investments, Barclays Capital said in a report last month. Gold rose 27 percent this year, heading for a 10th consecutive annual advance. Investors are seeking hard assets as governments and central banks led by the Federal Reserve pump more than $2 trillion into the world financial system.
Chinese Demand
Higher commodity prices will be needed to slow U.S. consumption, “to make room for further Chinese demand,” Goldman said. The raw materials most affected will be those with the tightest supply, including crude oil, copper, cotton, soybeans and platinum, the analysts said. The S&P GSCI Enhanced Total Return Index gained 7 percent this year

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 http://www.bloomberg.com/news/2010-12-13/goldman-sachs-predicts-best-commodity-returns-for-2011-in-precious-metals.html