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Goldman Sachs calls commodity rally unsustainable

Goldman Sachs logo. EconoTimes

Despite big gains recently, biggest US investment bank is calling the current commodity rally unsustainable and rout not to be over with. Since January and early February bottom, almost all commodities have rallied sharply. Latest was iron ore which posted biggest gains ever according to metal bulletin. On Monday iron ore rose as much as 19% to trade around $58/ton.

Basic theme behind Goldman's call has been prevailing fundamentals of the market as it expects more supply to hit market as prices go up, instead it has called clients and producers to hedge to escape price slump next year. For iron ore, Goldman has kept its year end price target steady at $35/ton.

Similarly it is a bear in oil market. Previously it called for prices to reach as low as $20/barrel, however WTI has dropped to $26/barrel around in early February and from there it has rallied about 46% and currently trading at $37.9/barrel. It expects crude to remain under downside pressure and fluctuate between $20-40/barrel.

It has similar expectations for other industrial metals such has copper, Aluminium, which has also rallied between 10-25%. It expects price to fall by as much as 20% by next year.

It has remained bear in Gold too, which has been this year's top performer and previously issued call that Gold will drop to as low as $1000/troy ounce by year end.

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