Goldman forecasts negative return on commodities

Goldman Sachs lowered its 12-month forecast for commodity returns, predicting a fall in precious metals, agriculture and energy.

The bank, which kept its "neutral" recommendation on commodities, lowered its S&P GSCI Enhanced Commodity Index return forecast by 2 percent, compared with its previous forecast of a 0.1 percent increase.

The 12-month return forecast includes a 15 percent drop in precious metals, a 7 percent fall in agriculture and a 1 percent decline in energy, the bank said in a note on Wednesday.

Goldman Sachs said it expects industrial metals to rise 2 percent.

"Although geopolitical risks dominated the market flows in late August, oil and gold prices have since returned to mid-August levels as the likelihood of military intervention in Syria has diminished," Goldman analyst Jeffrey Currie said, adding that returns were expected to be mostly flat over the next year.

Goldman Sachs maintained its 12-month Brent price view of $105 per barrel, saying that though prices remain skewed to the upside owing to the uncertainty over Syria, a range of about USD 125.00/bbl was "unsustainable", as the OECD strategic petroleum reserves (SPR) act as significant spare capacity.

It forecast an average WTI-Brent spread of -USD 8.00 to -9.00 per barrel in 2014.

Goldman also said it expected gold prices to decline into 2014 on the back of an acceleration in US economic activity and a less accommodative monetary policy stance.