Robust demand growth for raw materials worldwide should underpin the case for investors to own them, Goldman said in a research note published Monday.
Jeffrey Currie, global head of commodities research at the U.S. bank, said "a positive carry in key commodity markets and already strong global demand growth across the commodity complex reinforces the case for owning commodities. And hence we maintain our 12-month overweight recommendation, now with a forecasted return of almost 10 percent."
Unlike equities, which discount future growth, commodities rise as the current levels of demand offset the amount of available supply, according to Goldman.
The bank said it does not anticipate the oil market to shift back into contango — when futures prices for a commodity are higher than the current spot price — in 2018. Therefore, a positive roll yield in oil will bring returns of around 15 percent next year, Goldman analysts said. The roll yield refers to an amount gained when the futures price converges to the spot price as time passes.
While Goldman said it had "significant divergences" regarding its views on metal commodities, its analysts were most bullish on copper and most bearish on aluminum.
"The difference lies in the supply dynamics … While copper supply is likely to become increasingly constrained over the coming years, aluminum supply should become more abundant," Goldman analysts said.