SINGAPORE (Bloomberg) — Goldman Sachs Group Inc. says keeping the faith in commodities is paying off.

Four weeks after the bank called for patience as prices tumbled the most in eight months, most raw materials are back to levels from before the sell-off. Goldman says its own temperance is yielding results as its top 2017 trading recommendation of going long on the S&P GSCI Enhanced Index is back in the money by 7%, according to a report dated April 12.

The bank’s confidence is unshaken as it believes macroeconomic data will show improvement, Chinese demand for metals will increase and OPEC’s crude production cuts will lead to a decline in oil stockpiles. Goldman maintained its overweight recommendation on commodities and its 3 and 12 month forecasts for gains of 5% and 4%, respectively. Supply uncertainty has been mostly resolved, reinforcing confidence in long-term pricing and leaving demand as the primary focus for the market, according to the note.

“We still believe that the market needs more patience,” analysts including Jeffrey Currie and Michael Hinds wrote in the report. “Macroeconomic data has been partially distorted by weather events in the U.S. In China, we still have no hard data yet for March to know whether the post-Chinese New Year rebound in activity has occurred, and the oil draws were not anticipated until second quarter.”

The S&P GSCI measure of commodities slid 3.5% last month, its biggest drop since July, amid losses in oil, nickel and sugar on concerns that supplies were abundant. But in April, the gauge is up more than 3% as crude rebounded on optimism the Organization of Petroleum Exporting Countries will extend its output cuts aimed at easing a global glut. The Bloomberg Commodity Index has gained almost 1% this month after a 2.7% decline in March.

Crude gains

“We forecast that inventories will continue to decline driven by the combination of production cuts and the strong demand growth,” the analysts wrote, referring to oil. The bank reiterated its outlook for U.S. West Texas Intermediate to rise to $57.50/bbl and Brent crude to $59/bbl in the second quarter. (by Pratish Narayanan, World Oil)

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