(Reuters) - Goldman Sachs said on Monday the G20 meeting this week could be a catalyst for a rebound in commodities prices, possibly prompting a thaw in U.S.-China trade tensions and offering greater clarity on a potential OPEC oil curb.
“Given the size of dislocations in commodity pricing relative to fundamentals, with oil now having joined metals in pricing below cost support, we believe commodities offer an extremely attractive entry point for longs in oil, gold and base (metals),” the bank said in a note.
Leaders of the G20 industrialized nations meet in Argentina this week and are set to discuss U.S. foreign policy, climate policy, an OPEC cut, and the China-U.S. relationship.
Goldman believes the Organization of Petroleum Exporting Countries and other nations will come to an agreement, leading to a recovery in Brent prices.
Oil prices limped higher on Monday after Friday’s 7 percent rout.
“While we didn’t think that Brent prices were justified at $86 per barrel, neither do we believe that they are at $59/bbl with our 2019 Brent forecast at $70/bbl,” Goldman said.
Oil demand growth is likely to “remain resilient,” at 1.6 and 1.5 million barrels per day this year and next, while Iranian exports could decline through 2019, Goldman said.
The Wall Street bank retained its “overweight” recommendation on commodities and forecast 3-month, 6-month and 12-month returns on the S&P GSCI commodities index at 19.5 percent, 17.3 percent, and 17.2 percent, respectively.
In precious metals, the bank noted the “best way to trade dislocation created by excessive U.S. optimism is via gold.”
Gold prices declined more than 10 percent from a peak in April as investors opted for the safety of the dollar amid the U.S.-China trade war and rising U.S. interest rates.
Goldman recommended going long on palladium at $1,119 per troy ounce and shorting platinum at $840 per troy ounce, reasoning it would take several years to adopt a more platinum-heavy autocatalyst.
Reporting by Karen Rodrigues in Bengaluru; Editing by Jeffrey Benkoe