NEW DELHI: With stock markets in doldrums following the unexpected missile attacks in West Asia, investing in oil, precious metals and commodities linked to the fast-expanding electric vehicles (EV) market may well be an investors’ safer bet in 2020.
Among others, Goldman Sachs has said its top recommendation for the new year is to belong on commodity index play, with better returns likely from oil. “In 2020 and for the rest of this coming decade, we believe the old economy will be focused on cleaning up its excesses of too much debt, emissions and capacity, which is compounded from the redundancies created by decarbonisation,” Goldman Sachs said in a note.
The New York banker said its findings support the “2020 trade recommendation to belong on oil-heavy” indices. “Prices of Brent oil are likely to be upwards of $70 a barrel even after the West Asian situation has calmed down. The US-China trade deal will mean demand will go up and not down,” said a top Indian Oil Corporation executive charged with importing crude.
Goldman Sachs forecasts returns of 7.4 per cent from energy, 8.4 per cent for precious metals, followed by 4.9 per cent for industrial metals.
Gold is expected to be the breakout commodity of 2020, with some forecasting that prices could touch $1,675 an ounce from the current $1,552. Gold prices in India surged by Rs 2,000 in just two weeks. Usually, gold is a defensive buy to guard against stock and realty market downsides, but also a buy during politically sensitive times such as now with risks of a West Asian conflagration.
“Unrest in the Middle East, US elections, an economic slowdown in India and China are reason enough for betting on gold. Many think the rally last year was great and cannot be repeated, but many of us feel the decade will see more gold rallies and 2020 will be one of them,” said Ashu Khanna, a commodities trader.
Silver, the lesser noticed commodity, has also been rising in tandem with gold and many punters aver could cross Rs 50,000 a kilo after rising 23 per cent to Rs 47,000 in 2019.
Outlook for lithium, nickel and cobalt — metals required by the electronic vehicle industry — are expected to be good as the world moves towards EVs. “Changes of subsidy rules in many countries including China saw demand for cobalt and lithium softening. But we see an upside with renewed thrust towards EVs globally. China will be among leaders in trying to gobble up resources linked to EVs,” said Khanna.