Nov 13 (Reuters) - According to a note dated Sunday, Goldman Sachs, a leading global investment bank, predicts increased returns on commodities over the next 12 months. The bank expects a 21% return on the oil-heavy S&P GSCI Commodity Index, driven by higher spot prices and buoyed by easing monetary policy and concerns of a global recession. Furthermore, commodities are strengthening as investors seek to hedge against geopolitical supply risks.

Goldman Sachs anticipates significant returns of around 31% from the energy sector and approximately 17.8% from industrial metals. The bank recommends "going long commodities in 2024" due to expectations of higher spot commodity prices, carry returns, and hedging value against negative supply shocks. Additionally, the bank suggests that core disinflation indicates that the U.S. Federal Reserve and European Central Bank have likely finished raising interest rates, which could ease pressure on GDP growth and support commodities demand.

The bank also highlighted OPEC-driven declines in oil inventories and growing demand for "green metals," particularly from China, as factors that will further bolster commodity returns. Goldman Sachs asserts that energy and gold can effectively serve as a hedge against negative supply shocks, providing protection when other assets may experience lower growth.

Goldman Sachs believes that there will be ongoing resilience in demand, leading to a recovery in oil prices. However, the possibility of a warmer fourth quarter and increased supply from certain producers have prompted the bank to revise its 2024 average Brent price forecast to $92 a barrel, down from an earlier projection of $98 a barrel.

In the realm of metals, Goldman Sachs forecasts a significant tightening in copper and aluminium stocks through the mid-2020s. As a result, prices are expected to rise in the second half of 2024.

Overall, Goldman Sachs remains optimistic about the commodities sector, projecting robust returns driven by higher spot prices, easing monetary policy, and the hedging value against geopolitical supply risks. The bank's forecast aligns with the belief that ongoing demand resilience and sustainability efforts will positively impact the market in the coming year.