There’s still money to be made from investing in commodities, according to Citigroup Inc.
While a rising U.S. dollar, sustained oversupply and slowing growth in emerging markets including China are still hurdles to a recovery, many markets may strengthen in the second half of next year as the collapse in prices shrinks production, the bank said in a report.
Citigroup also forecasts “a more persistent price recovery by 2017 for oil and base metals, and possibly agriculture.”
The bank predicts the start of a recovery in some raw materials as returns from commodities head for a fifth annual drop amid the slowest growth since 1990 in China and the prospect of a stronger dollar if U.S. interest rates increase.
Citigroup sees “plenty of opportunity ahead for investors” as it believes that in most cases futures prices are below fair market value, both in a six to 12 month period and, more particularly, beyond.
“Citi’s outlook for end-2016 projects higher prices for U.S. natural gas, crude oil, all base metals but especially copper and nickel as well as platinum and palladium,” analysts including Ed Morse said in the report.
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