Goldman cuts commodity outlook

Goldman Sachs Group Incorporated cut its “near-term” outlook for commodities and reduced forecasts for oil and coffee amid prospects for weak demand from China to Europe. The bank also exited a bet on lower gold prices.

Goldman Sachs lowered its three- and 12-month return forecasts for the Standard & Poor’s GSCI gauge of 24 commodities to 2.5 percent, from 6 percent in three months and 3 percent in 12 months, and cut its near-term outlook on commodities to neutral from overweight, according to the report released Tuesday. It exited its bet on lower gold prices, with a potential gain of 10 percent, while saying bullion may fall even more.

Goldman Sachs issued a sell recommendation on gold on April 10, before the precious metal plunged 13 percent in the two sessions through April 15, the biggest drop in three decades. Tuesday, gold futures traded at $1,409.40 an ounce on the Comex in New York, up 6.7 percent from a 14-month low set on April 16. The bank said today gold may trade at $1,530 in three months, $1,490 in six months and $1,390 in 12 months.

“Commodity returns have dropped sharply so far in April as weaker-than-expected macroeconomic data releases in the U.S., Europe and China furthered concerns around global economic growth,” New York-based analyst Samantha Dart said in the report. “The negative sentiment in the market has weighed on cyclical commodity prices in particular.”

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The GSCI index slid as much as 1.1 percent today as a report showed Chinese manufacturing expanded at a slower-than- expected pace, providing more evidence of a pullback in the country’s economic growth. Commodities, which touched a nine- month low on April 18, are down 6.4 percent this year. Treasuries returned 0.7 percent, according to an index calculated by Bank of America Corp., and the MSCI All-Country World Index of equities gained 6.1 percent.

Goldman Sachs said it closed its bearish recommendation on gold as prices moved above $1,400 and were “significantly below” its target at $1,450. Holdings in exchange-traded products backed by gold dropped 11 percent this year to 2,330.5 metric tons, according to data compiled by Bloomberg. Assets in the SPDR Gold Trust, the biggest gold exchange-traded fund, are the lowest since 2010.