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Be careful with commodities: strategist

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Goldman Sachs is creating controversy in the commodity markets.

In April the investment bank closed its commodities basket trade, saying “near-term risk reward no longer favours being long in the basket.” But then earlier this week the investment bank came out and raised its forecast for oil prices.

John Licata, a commodity strategist at Blue Phoenix, tells BNN that he still thinks commodity prices are overvalued in the near term.

“I still think we have some downside to go, I think longer term trends are intact, but for now a lot of the miner metals and base metals—as well as the price of silver—are inflated at the moment,” he says. “The present optimism [for commodity prices] is a bit premature.”

Licata says China’s smaller markets could become a long-term catalyst for higher commodity prices.

“China is going to be an interesting place for growth in second tier cities,” he says. “So while Shanghai and Beijing may be leading the way at present…other smaller cities are going to see phenomenal growth that makes that commodity story much more viable.”
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