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Commodities: How to Trade Like Goldman Sachs
The Pragmatic Capitalist
It’s no secret that Goldman Sachs (GS) has an enormously profitable trading operation. In the most recent quarter they reported an astounding $10B in total trading and investments. This represented 81% of the firm’s total revenues. One of the most profitable arms of this trading operation is the commodity desk. Goldman’s commodity calls are often market moving and always noteworthy. Their latest commodity positions reflect the firm’s continued bullish outlook on the economic recovery.
Goldman is very bullish on Natural Gas. Their 3 month price target on Nat Gas is $6.50 while their 12 month target is $7.70. That is a 33% and 57% expected climb.
How to play it? Goldman likes Summer 2010 NYMEX Natural Gas futures.
In the WTI oil market Goldman has a 3 month target of $85 and a 12 month target of $94. That equals a 9% and 20% rise in oil prices. They see continued demand from China as a primary driver.
How to play it? Goldman likes a long timespread. They like buying the December 09 WTI and selling the 2011 WTI contract.
In the metals markets Goldman is surprisingly bearish on Gold and Silver. Their 3 month and 12 month price target for gold is $960. Their 3 month target for silver is $15.60 and their 12 month target is $16. This is consistent with their benign inflation expectations. They do not recommend any specific short trades on the two metals at this time. They do, however, like 2010 January Platinum.
In terms of agriculture Goldman likes Corn futures. They currently have a $4 3 month price target and a $4.50 12 month price target.
How to play it? Goldman likes the May 2010 Corn futures.
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We largely share Goldman’s take on commodities. Gold as an inflation hedge seems a pretty curious idea in a largely deflationary world..