Goldman Sachs predicts a commodities bull market in 2016

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Goldman analysts said in a recent report that fundamental adjustments will lead to a new bull market in  commodities:

“The key theme for 2016 will be real fundamental adjustments that can rebalance markets to create the birth of a new bull market, which we still see happening in late 2016.
Real fundamental adjustments have always taken time due to physical frictions inherent in supply chains, labor contracts and the opportunity costs associated with shutting down a mine, field or plant. This is the basis of real option theory, which argues that prices will likely overshoot financial costs to the downside before producers have an incentive to reduce output. And, just as in oil, metal prices have recently dropped below our targets suggested by financial economics”

Goldman Sachs forecast is for WTI crude oil prices to average $40 per barrel in the first half of 2016.

 

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