Monday February 28, 2022 15:53
As the West steps up sanctions against Russia in the aftermath of a full-scale invasion of Ukraine, Goldman Sachs raised its commodities price forecasts, citing supply disruptions and an even more problematic inflation outlook.
The commodities to pay close attention to are the ones Russia is a major producer of — oil, gas, aluminum, palladium, nickel, wheat and corn.
Gold is another safe-haven commodity that is due for a much bigger rally going forward, according to Goldman.
"The recent escalation with Russia create clear stagflationary risks to the broader economy, driven by higher energy prices, which reinforce our conviction in higher gold prices in coming months and our $2,150/toz (troy ounce) price target," Goldman said.
Goldman explained that gold would play a central role in this conflict as Russia turns to the precious metal for leverage amid sanctions. Russia's gold reserves total 2,298.53 tonnes, according to World Gold Council.
"Gold's unique role as the currency of last resort will likely be apparent if restrictions on Russia's central bank accessing its offshore reserves leave it leveraging its large domestic gold stockpiles to continue foreign trade, most likely with China," the bank said.
From the macro perspective, Goldman raised its inflation outlook, stating that it is "increasingly concerned" about the pace of inflation in 2022. "A very high inflation path in 2022 should make an easy case for steady rate hikes at all seven remaining" Federal Reserve meetings in 2022, said Goldman economist David Mericle said in another note to clients. | |
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