This year sets up 'bullish concoction' for commodities, gold on 'cusp of sustained upside,' says Goldman

(Kitco News) Commodities are in store for a 'bullish concoction' in 2023, according to Goldman Sachs, which sees a combination of the macro environment and low inventories boosting prices.

The commodities sector is looking at "superior total returns" in 2023 and is expected to outperform other asset classes, analysts at Goldman Sachs said in a note.

After a surge in commodity prices in the first half of 2022, the sector saw a decline due to rising interest rates and lower demand. However, the outlook for 2023 is very positive as China reopens amid low inventories, said Jeff Currie, head of commodities research at Goldman.

"You cannot come up with a more bullish concoction for commodities," Currie said during a presentation last week. "Lack of supply is apparent in every single market you look at, whether it is inventories at critical operating levels or production capacity exhausted."

Goldman pointed out similarities between the 2007-2008 commodities rally and today. One exception is the European natural gas due to sufficient inventories for now.