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Goldman Sachs on Wednesday maintained its ‘overweight’ recommendations for commodities in 2021, reasoning the sector was possibly the best hedge against likely inflation and poised for another bull market.

The bank forecast a return of about 27% over a 12-month period on the S&P/Goldman Sachs Commodity Index (GSCI), with a 19.2% return for precious metals, 40.1% for energy, 3% for industrial metals and a negative 1% return on agriculture.

The bank maintained its 3, 6 and 12 month targets for gold and silver at $2,300 and $30 an ounce respectively, as it believes near-term inflation has further room to run, while an increase in solar installations supports silver demand.

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“In metals, we have seen a sharp drop in maintenance capex and supply disruptions dragging into 2021. This suggests that, even if demand falters in coming weeks as winter exacerbates COVID, markets will likely continue to rebalance, barring an outright collapse in demand,” Goldman Sachs said in a note.

The bank said base metals and agriculture had more near-term upside than oil on recovering demand from China.

Last week, Goldman cut its 2021 Brent crude price forecast but said a surge in COVID-19 cases in Europe and the United States only represented a “speed bump” before a potential vaccine and continued supply cuts by top producers tightened market fundamentals.

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