Goldman Sachs warns that investors are starting to cool on commodities and could miss out on further gains for the year's best-performing asset class.
Earlier this week, the bank raised its outlook for its commodities index, which tracks assets like crude oil and copper. It now thinks the Goldman Sachs Commodities Index will return 8 percent over the next 12 months, up from its previous forecast for a 5-percent gain.
Commodities are now posting their best year-to-date gains in a decade, according to Goldman. The fuel for that performance is crude oil. International benchmark Brent crude prices have risen more than 51 percent over the last year, while the cost of U.S. crude is up nearly 45 percent.
"The rally likely has room to run, particularly from a returns perspective. Oil fundamentals are now more bullish as robust demand faces supply disappointments," wrote Jeffrey Currie, Goldman's global head of commodities.
But Goldman says the market's mounting concern over a slowdown in global growth and rising U.S. interest rates are weighing on sentiment around commodities. Goldman notes that record-setting long positions in oil — or bets that crude prices will keep rising — have moderated since the commodity crossed $73 a barrel.
Goldman thinks the market's fears are largely unfounded, saying "Growth concerns will likely prove temporary" and "realized demand remains robust."