Goldman Sach’s 2011 Forecast: Stocks, Gold, Oil Higher by News by Bertha Coombs
(CNBC) — Goldman sees stocks gaining as the U.S. economic growth accelerating from 2.5 to 4 percent by the end of 2012, but says investors will continue to have doubt.
… Investors remain understandably skeptical about positive economic data, Goldman says, because the improvement is coming from a fairly low base. But the strategists argue with strong corporate balance sheets, low inflation and interest rates that “the path of earnings growth has rarely been smoother.”
… Goldman believes low U.S. interest rates will continue to underpin the rally in commodities like gold. The firm expects the precious metal futures to climb to $1,690 an ounce by the end of 2011 and continue to move higher.
But the firm believes prices will likely peak at $1,750 an ounce in 2012, as the U.S. recovery will see interest rates move higher.
Goldman’s commodities strategists also see oil futures rising to $105 dollars a barrel in 2011, and demand improving along with the U.S. economy. The firm notes, “Energy is historically the best performing sector when the ISM is above 50, which seems increasingly likely given strong October ISM and our US economists upgrade to their 2011 growth outlook.”
… One of the firm’s top trades for 2011 involves shorting the U.S. dollar/Chinese yuan exchange. The firm argues low rates in the U.S. will keep the dollar lower, while China will have to let its currency rise next year, as it undertakes policies to control growth. “Rising external political pressure on the CNY from the US and other countries, as well as the threat of escalating trade tensions, expose China’s dependence on exports. More gradual CNY appreciation would help alleviate these tensions.”
