Goldman Sachs Forecasts More Strength for Gold, Commodities

Global investment firm Goldman Sachs forecasts more strength for gold as well as broader commodities once the Fed’s hawkishness starts to dissipate.

That, in effect, should bring the U.S. dollar down and subsequently, gold prices higher. Additionally, a flight to safety in assets like precious metals adds an extra catalyst amid the banking system turmoil.

Goldman Sachs also sees exchange traded fund (ETF) flows providing extra support for gold prices. China’s reopening will also prop up demand for the precious metal.

“We believe the market will be well supported not only by ETF (exchange traded fund) inflows once Fed fund rates have peaked but by a stronger ‘Wealth’ effect from the East as the USD depreciates into year-end on yield compression and EM GDP grows strongly on China reopening effects,” Goldman Sachs noted, making light of a commodities supercycle that can result from the aforementioned confluence of events.

Get Active Commodities Exposure in NBCM

Given Goldman Sachs’ forecast, getting exposure to gold and broader commodities is made easier with one ETF: the Neuberger Berman Commodity Strategy ETF (NBCM). The fund uses active management, which allows for fluidity when adding commodities exposure.

With its active management style, NBCM puts the portfolio holdings in the hands of seasoned portfolio managers, which will allow for changes to holdings when market conditions warrant necessary adjustments. This adds a layer of flexibility to an investor’s portfolio, especially with the capital markets responding to the U.S. Federal Reserve and interest rate policy.

The fund invests in commodity-linked derivatives with an active risk-balanced, diversified approach that seeks to minimize the effects of market volatility — something privy to the commodities market. Tactical exposure adjustments expand potential alpha sources by considering top-down macro variables among commodity sectors and individual commodity outlooks to take advantage of short- and long-term opportunities.

NBCM comes with a 0.65% net expense ratio (0.79% gross), and the fund currently (as of March 23) has 28 commodity holdings for diversified exposure. The current top allocation goes to gold, which is ideal given its popularity among Wall Street traders.

“Gold is becoming a favorite trade on Wall Street as many traders remain nervous post-Fed and over how quickly will U.S. authorities be able to contain further banking turmoil,” said OANDA senior market analyst Edward Moya. “Gold is going to shine here, and it seems positioned to find a home above the $2,000 level. A run to record territory is not that far away.”

For more news, information, and analysis, visit the Commodities Channel.