Goldman Sachs expects a rise in the prices of commodities that Russia is a major producer of and lifted its short-term Brent crude forecast as the West stepped up political and economic sanctions on Moscow for its invasion of Ukraine.
“The range of near-term price outcomes for commodities has become extreme, given the concern of further military escalation, energy sanctions or potential for a cease-fire.” Goldman said in a note to clients on Sunday.
Further, “we expect the price of consumed commodities that Russia is a key producer of to rally from here—this includes oil, European gas (and hence aluminum), palladium, nickel, wheat and corn,” Goldman said.
The bank raised its one-month Brent crude oil price forecast to $115 a barrel from $95 per barrel previously, with “significant upside risks on further escalation or longer disruption.”
Brent crude futures on Monday rose to well above the key $100 a barrel level as the Ukraine crisis deepened, while U.S. West Texas Intermediate (WTI) crude futures were near $96 a barrel.
“The recent escalation with Russia create clear stagflationary risks to the broader economy, driven by higher energy prices, which reinforce our conviction in higher gold prices in coming months and our $2,150/toz (troy ounce) price target,” Goldman said.
Spot gold on Monday was trading at over $1,900 per ounce, and set for its best month since May.
“Gold’s unique role as the currency of last resort will likely be apparent if restrictions on Russia’s central bank accessing its offshore reserves leave it leveraging its large domestic gold stockpiles to continue foreign trade, most likely with China,” the bank said.
