Goldman: Time to sell out of commodities

The oil price fell by as much as $3.25 a barrel on Tuesday after the world's biggest commodity trader called the top of the market for crude and a range of other commodities.

Goldman Sachs advised its clients to sell their investments in oil, copper, platinum and cotton.

It argued record levels of speculative trading in crude have pushed their prices up so much in recent months that in the near term, risk-reward no longer favours holding them, the Guardian reports.

Investors' best bet is to quit while they are ahead, the bank said, after a 25% rise in the value of the CCCP basket (comprising crude oil, copper, cotton, soya beans and platinum) in four months.

The bank's recommendation was backed by the International Energy Agency (IEA) which warned crude was now so expensive it was hitting the global economy, reducing the demand for oil and other commodities.

In a note to clients, Jeffrey Currie, global head of commodities strategy at Goldman, said the bank's decision in December to advise clients to invest in the CCCP basket had been "driven by an expectation of rising demand from the leading emerging market players".

"While that did play out early this year in the non-energy sections of the basket, it was overtaken by a supply shock driven by events in the Middle East. That has had the effect of introducing more downside risk into the trade, particularly given record levels of speculative longs [trading] in crude," he said.

Although the CCCP basket still has the potential to rise in value over the next 12 months - if emerging economies perform well and stoke underlying demand - in the short term Currie is recommending his clients sell out.