So after last weeks drop in commodity prices goldman thinks a recovery is on the way??? I could see if commodity prices had a downward drop for 4 or 7 years, but one damn week and they are already looking forward to a recovery, this market wants instant gratification. This is one fucked up market if only one week later people are hoping for a rally back to new highs on the commodities. Goldman Sees Commodity Recovery as Slump Erases $99 Billion bloomberg Maria Kolesnikova and Yi Tian, On Monday May 9, 2011, 5:50 am EDT The commodities rout that knocked off $99 billion of market value last week is driving out speculators and leading Goldman Sachs Group Inc., which forecast the plunge, to predict a possible recovery. The combination of slower growth in U.S. service industries and fewer German manufacturing orders helped drive the Standard & Poorâs GSCI Index of 24 commodities down 11 percent in five days, the most since December 2008, and erased all the gains since mid-March. Wheat, zinc and gold rebounded at the end of the week as U.S. payrolls exceeded economistsâ forecasts, reducing concern that demand will weaken. âGiven the magnitude of the pullback, it does create an opportunity for more upside potential, particularly in the second half of this year, when fundamentals are expected to tighten,â Jeffrey Currie, the London-based head of commodity research at Goldman, said in a May 6 interview. A month ago, Currie told investors they should be âunderweightâ in commodities. âIn the very near-term, weâd be a little cautious,â he says now. The value of all 24 commodities tracked by the S&P GSCI index was about $805 billion on May 6, compared with $891 billion on April 29, according to data compiled by Bloomberg on the number of outstanding contracts and prices of futures closest to delivery. Combined holdings of exchange-traded products backed by precious metals fell to $119 billion from $132 billion, the data show. Investment Funds Speculators retreated after investment funds had made near- record bets on price gains last month and the S&P GSCI reached the highest since August 2008. Commodities beat stocks, bonds and the dollar for five consecutive months through the end of April, the longest in at least 14 years, on forecasts for demand exceeding output in everything from oil to copper to corn. The most influential analysts and fund managers are divided on where prices are headed. The last time the S&P GSCI fell this much, the index rebounded 12 percent the following week, and by the end of last month, it had more than doubled. Bulls say the expanding global economy, led by growth in China, India and Brazil, is boosting demand at a time when producers from BHP Billiton Ltd., the largest mining company, to BP Plc, Europeâs second-biggest oil producer, canât keep up. Selling would be âpremature,â and the rally will resume, said Hussein Allidina, the head of commodity research at Morgan Stanley in New York, reiterating comments made before the rout. âThe decline we are seeing is not being driven by any meaningful change in fundamentals,â he said. âNot Turning Pointâ âThis is not a turning point,â said Kevin Norrish, a London-based managing director at Barclays Capital, whose commodities research team is ranked by Bloomberg in the top three for copper and gold. âWeâd expect to see a pretty good recovery from these levels before too long.â The S&P GSCI climbed 2.1 percent by 10:49 a.m. in London as silver futures rose 4 percent and crude oil in New York added 3 percent. Brent crude should rebound about 2 percent to $115 a barrel in coming weeks because violence in northern Africa and the Middle East continues, said Christin Tuxen, an analyst at Danske Bank A/S in Copenhagen and the most-accurate oil forecaster tracked by Bloomberg over eight quarters. The fighting already curbed supply from Libya and increased concern that it may spread to regional producers including Saudi Arabia. JPMorgan Chase & Co. raised its oil-price forecasts for this year and next on May 6 because it expects production to fall short of demand. Brent crude will average $120 in 2011 and 2012, from previous estimates of $110 and $114, the bank said. Oil prices should match or top their recent highs by next year, Goldman said in a note to clients on the same day. Global Recession The bears say that even if the economy grows, speculation is so excessive that prices no longer reflect supply and demand. The S&P GSCI Index still is 34 percent higher than a year ago and more than twice where it was in February 2009, when economies were recovering from the global recession. Commodities are at the start of a bear market that may last as long as five to 10 years, said Michael Aronstein, the president of Marketfield Asset Management in New York who correctly predicted the 2008 slump that drove the benchmark index down 66 percent in seven months. The scale of investment means âsupply and demand is almost meaningless,â Aronstein said in an interview May 6. âItâs almost like the last days of the tech bubble.â Oil, which lost 15 percent last week in New York and 13 percent in London, became âdetached from fundamentals,â said Oswald Clint, London-based head oil analyst at Sanford C. Bernstein, the joint-most-accurate oil forecaster tracked by Bloomberg in 2010. Brent could drop below $100 a barrel, about 11 percent lower than now, he said.