Goldman Sachs Group Inc. (GS) cut its 12- month prediction for commodity returns, while forecasting gains for crude oil and gold and keeping an “overweight” allocation in raw materials. 

The bank is bullish on oil because the price is vulnerable to supply disruptions from Iran and elsewhere and OPEC spare capacity is “at a trough” just as the world economic recovery is gaining momentum, it said. The bank reduced its estimate for returns to 12 percent from 15 percent after prices rallied this year, analysts led by Jeffrey Currie said in a report today. They kept their predictions for Brent and gold at $127.50 a barrel and $1,940 an ounce compared with $121.23 and $1,755.30 today.
 

Commodities advanced 8.5 percent this year to the highest level in six months as measured by the Standard & Poor’s GSCI index of 24 raw materials. Prices climbed as the U.S. economy strengthened and the Chinese central bank cut reserve requirements. While Morgan Stanley is also bullish on gold, it expects oil prices to decline in the first half as supply recovers and demand slows, it said in a report Feb. 20.
 

“With much of the ‘value’ opportunities behind us, we look to fundamental drivers for further expected gains in 2012, which we believe will be centered in the oil complex,” said Goldman. Oil climbed to a nine-month high in New York yesterday after Greece won a second bailout. Gold advanced 12 percent this year.
 

The bank is bullish on oil because the price is vulnerable to supply disruptions from Iran and elsewhere and OPEC spare capacity is “at a trough” just as the world economic recovery is gaining momentum, it said.
 

(Source: Bloomberg)