Goldman Sachs Sees Copper and Gold Prices Rising on Fed Easing Outlook

Credit: Reuters

According to analysts at Goldman Sachs, they anticipate that copper and gold will experience the most significant price boost in the commodities sector if there are potential U.S. Federal Reserve interest rate cuts. They project a 6% increase for copper and a 3% increase for gold in response to a 100 basis point decline in U.S. 2-year rates. 

As of 0542 GMT on Wednesday, three-month copper on the London Metal Exchange was near a three-week high at $8,548 per metric ton, while spot gold was at a near two-week high at $2,030.30 per ounce. 

However, they do not expect significant price effects on natural gas or agricultural commodities due to micro factors such as seasonal inventory cycles and weather.Despite the theoretical ambiguity of the impact of lower interest rates on commodity prices, Goldman Sachs finds that the demand boost from a lower cost of carrying inventory and higher GDP via easier financial conditions tends to dominate.