Will commodities rally next year?

Some people think that the rally in commodities is over, but Goldman Sachs thinks otherwise.

Supply shortages and insufficient investment in new supply will result in a bumper year for commodities in 2023, Goldman Sachs says, expecting the S&P GSCI commodity index to post a 43% return next year.

Commodities are set to be the best-performing asset class in 2023, the bank's strategists said.

"From a fundamental perspective, the setup for most commodities next year is more bullish than it has been at any point since we first highlighted the super-cycle in Oct 2020," Jeffrey Currie, global head of commodities research at Goldman Sachs, wrote, as carried by The Australian Financial Review.

Q12023 could be more underwhelming than the rest of the year due to the expected slowdown in economies, but the low levels of investment in oil, gas, and key metals will continue to underpin what Goldman has called a new supercycle in commodities.

The drop in Brent Crude to the low USD80s is likely temporary, according to the Wall Street bank, which says that China's demand could be under estimated.

Key metals necessary for the energy transition are also set for a bull run amid expected shortages in the coming years, Goldman and industry giants say.

Earlier this month, Glencore said that a huge shortage of copper is looming while significant mine development is lagging.

According to Glencore's estimates, under the net-zero emissions pathway of the IEA, the world will be more than 50 m tons short of copper between 2022 and 2030.

The current record-high of USD10,845 per ton for copper was hit in Mar 2022. And Goldman Sachs expects it to top that next year at USD11,000 a ton.