Interested in learning more about futures trading? Major investment bank Goldman Sachs stated in a recent report that commodities have entered a "renaissance" phase that offers favorable conditions for investors, and this asset class may offer a great environment if you want to bolster your futures trading experience.
Strong Opportunities
In the report, Goldman Sachs said raw materials will experience tight supply constraints in the near future and economic growth will open up new sources of demand for these assets. These commodities will provide market participants with a strong opportunity to invest, but their prices will probably not skyrocket in the next few years.
The major investment bank has projected that these raw materials will appreciate between 7 and 11 percent between now and the end of 2013. Goldman Sachs specifically recommended oil, copper and corn in particular. In addition, the report said that gold prices are at a higher risk of falling in value.
Renaissance
The rising demand, falling supply and moderate appreciation are what Goldman Sachs was referring to when it used the term "renaissance." The major investment bank said the investment cycle for commodities that started at the end of the 1990s will generate "new opportunities."
Since trading futures means making a bet that a particular asset will either rise or fall in value in the near future, the existing climate for commodities described by Goldman Sachs may make them appealing for these types of wagers. These assets have a tendency to not follow the price movements of stocks and bonds, so they can be used for the purpose of diversifying an investment portfolio.
Short-Term Potential
The report showed that these opportunities will be created as the global economic expansion gains steam during the last six months of 2013. The existing market dynamics for these assets will probably generate shortages in the short-term, which could cause price appreciation in the near future compared to over a longer time frame.
These short-term upside opportunities represent a contrast to the bull market of the 2000s, at which point futures contracts with longer time frames generated higher prices than those with shorter time frames.
The specific scenario of shorter-term investments generating higher returns than long-term investments will generate substantial yield for market participants even amid greater price stability in the raw materials, the major investment bank stated. The report pointed to the commodities market of the 1980s and 1990s, during which prices remained largely unchanged and were influenced by short-term demand variables.
This increased price stability may be welcome, as the period between 2005 and now has had commodity price fluctuations three times as high as the same period starting in 1980, according to Reuters.
Since Goldman Sachs is predicting that commodities in particular could generate substantial returns in the near future during an environment that does not suffer substantial price fluctuations, the beginning of this "renaissance" may provide a great time for you to invest using futures and learn more about the financial instruments.
Offering free, quality futures trading education, Trading Pub gives you the opportunity to interact with some of the top traders and investors in the industry.
Comments