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April 15, 2011

Global

Commodity WatchCommodities Research

Growing conviction in NT downside, but longer-term upside intact

Mounting downside risks to current exceptionally high crude oil prices are leading us to

recommend an underweight allocation to commodities on a 3 to 6-month horizon, but we maintain

an overweight on a 12-month horizon on tightening fundamentals over the next year.

We recommend shifting allocation to underweightfor now...

Commodity returns have substantially outperformed, owing largely to the

loss of Libyan oil production and concerns that unrest in the Middle Eastand North Africa (MENA) could lead to losses in another oil producing

country. However, while contagion risk remains elevated, we maintain that

crude oil prices have pushed ahead of where fundamentals currently

suggest and that the near-term downside risk to prices has risen in recent

weeks as oil prices have climbed to exceptionally high levels last seen in

the spring of 2008. Not only are there now nascent signs of demand

destruction in the United States, but also elections in Nigeria, a potential

ceasefire in Libya and record market length on contagion fears. Further,

softening near-term base metals balances suggest that a stock-out in

copper inventories and associated price spikes has now been deferred

beyond 2011, and recent gold price strength has pushed us close to our

near-term price targets. As a result, we now recommend an underweightallocation to commodities on a 3 to 6-month horizon.

... But we still see upside for commodity returns on 12-mo horizon

We maintain that commodity returns still have upside on a 12-mo horizon,

particularly following the correction in oil prices that we anticipate, barring

further oil supply shocks. Barring further persistent increases in oil prices

that damage demand, we expect demand growth to continue to outpace

supply growth, leading to much lower inventories and OPEC spare capacity

later next year, which would be hastened should the Libyan outage persist.

We also believe that stock-out for copper has been deferred, not avoided,

and is now likely to occur during 2Q2012 while we expect low real rates

will continue to lead gold prices higher into 2012. Finally, we forecasthigher soybean prices on an expected deficit and believe that low

inventories skew price risk to the upside across key grains. We therefore

maintain an overweight recommendation to commodities on a 12-mo

horizon, but are lowering our 12-mo return forecast to 10.0% from 14.3%.

Allison Nathan

(212) 357-7504 a [email protected]

Goldman Sachs & Co.

Jeffrey Currie

+44(20)7774-6112 [email protected]

Goldman Sachs International

David Greely

(212) 902-2850 [email protected]

Goldman Sachs & Co.

Damien Courvalin

(212) 902-3307 [email protected]

Goldman Sachs & Co.

Joshua Crumb+44(20)7774-2535 [email protected]


Samantha Dart



Johan Spetz



The Goldman Sachs Group, Inc. does and seeks to do business with companies covered in its research reports. As a result, investors should beaware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a singlefactor in making their investment decision. For important disclosures, see the text preceding the disclosures or go towww.gs.com/research/hedge.html.

The Goldman Sachs Group, Inc. Goldman Sachs Global Economics, Commodities and Strategy Research

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April 15, 2011 Global

Goldman Sachs Global Economics, Commodities and Strategy Research 2

Hedging and trading recommendations

Petroleum

Hedging recommendations

Consumers: Concerns about the potential for further oil production losses in the Middle

East and Northern Africa (MENA) have pushed prices ahead of where fundamentals

currently suggest. Consequently, we recommend waiting before hedging core long-dated

volumes. However, with effective OPEC spare capacity now below 2 million b/d, any further

supply disruption will push prices up sharply, suggesting consumers should consider

options strategies to mitigate this upside risk to prices.

Refiners: Refining margins have recently shown counter-seasonal strength. However, this

strength largely owes to the local weakness in WTI. As we expect the spread between WTI

and Brent will narrow from current levels, we also expect product cracks to weaken.

Further, we maintain that refining margins will remain under pressure owing to the large

increase in refining capacity in Asia. As a result, we view any renewed rise in long-datedrefinery margins in 2011 as a selling opportunity for refinery hedgers. For 2012 and beyond,

we believe that crude will be the bottleneck in the system, rather than refining; this will

squeeze margins from the crude side through backwardation, suggesting that refiners

should also look for potential time-spread hedges.

Producers: The risk-reward trade-offs for producer risk management programs have

improved significantly as crude prices have reached the levels of spring 2008. We maintain

that prices have pushed ahead of where fundamentals currently suggest and believe that

the market will likely experience a substantial correction in coming months, barring

another supply disruption. We recommend that producers look at option strategies to

hedge against this risk.

Trading recommendations

We have no petroleum trading recommendations open at this time.

Natural Gas


Consumers: We believe that the opportunities for consumer hedging in the long end of the

NYMEX natural gas curve, particularly in calendar 2015 and 2016 contracts, have

diminished after price gains in recent weeks. Although the renewed nuclear safety debate

and demand from the transportation sector may add further upside to longer-term natural

gas demand, we view the risks to long-dated prices as more balanced now compared to

earlier this year.

In the UK market we believe opportunities for consumer hedging are equally limited at this

point, as European prices have also posted large gains recently as they are more directly

exposed to the recent events in the MENA region and Japan.

Producers: Given the recent price gains, we see hedging opportunities opening up for US

producers, especially in 2012 and beyond.


We have no natural gas trading recommendations open at this time.

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Base Metals


Consumers: We believe that cost-push support stemming from tightening hydrocarbon

markets will likely keep prices elevated in the near term. However, we believe that further

upside is likely limited from current levels across metals. As a result, we see less urgency

for consumer buying at these levels. Nevertheless, we continue to see cyclical tightnessdeveloping in these markets over the medium term, as well as further energy and FX-

related marginal cost inflation, suggesting that fundamental headwinds in coming quarters

could offer some opportunities for longer-dated purchases.

Producers: We maintain that the current historically high price environment looks

attractive for producer hedging across metals. We do not believe that nickel or aluminum

prices have strong upside potential off todays levels. Further, we now believe that extreme

cyclical tightness originally expected to develop later this year in copper will likely be

deferred, reinforcing our view that still near-record high prices are offering a compelling

hedging opportunity.


We have no base metals trading recommendations open at this time.

Precious Metals


Consumers: We expect gold prices to continue to climb in 2011 as the resumption of

quantitative easing should keep US real interest rates low. However, with the current round

of QE set to end in June 2011, and our US economics team now forecasting strong US

economic growth in 2011 and 2012, we expect US real interest rates to begin to rise into

2012, likely causing gold prices to peak in 2012. Consequently, we recommend near-dated

consumer hedges in gold.Producers: While we expect gold prices to increase in 2011, our view that downside risks

will likely increase heading into 2012 suggests this is a good time for gold producers to

begin scaled-up hedging of forward production, particularly for calendar 2012 and beyond.


Long Gold: Buy December 2011 COMEX Gold (Current value of $1,459.4/toz; $95.2/toz

gain).

We expect gold prices to continue to climb in 2011 as the resumption of quantitative easing

will keep US real interest rates low.

Agriculture


Consumers: Our expectation of further corn and soybean price upside and the

backwardated futures curve offer opportunities for consumers to layer in upside protection.

For cotton, we recommend consumers take advantage of potentially lower prices in the

coming months, assuming normal planting weather in the US, to layer in asymmetric

upside hedges for Dec-11 maturities and beyond. We believe that while average weather

conditions will bring crop prices lower, any weather disappointment will likely send prices

sharply higher.

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Producers: Our expectation for wheat prices below the current forward curve over the

medium term points to opportunities for producers to take advantage of the current higher

levels and implement long-dated hedge programs.


Long soybeans: Buy November 2011 CBOT soybeans (Current value of $13.52/bu; $1.92/bu

gain).We recommend holding long Nov-11 soybean positions as we see soybeans as the crop

most likely to remain in a deficit in 2011/12 on strong demand and acreage loss to corn and

cotton.

Current trading recommendations

Source: Goldman Sachs Global ECS Research.

Long Soybeans

Buy November 2011 CBOT Soybean November 18, 2010 - Agriculture Update $11.60/bu $13.52/bu $1.92/bu

Long Gold

Buy December 2011 COMEX Gold October 11, 2010 - Precious Metals $1,364.2 /toz $1,459.4 /toz $95.2/toz

As of close on April 13, 2011. Inclusive of all previous rolling profits/losses.

Current

profit/(loss)1Current trades First recommended Initial value Current Value

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Price actions, volatilities and forecasts

units 13 Apr Change Implied2 Change Realized2 Change 4Q 09 1Q 10 2Q 10 3Q 10 4Q 10 1Q 11 3m 6m 12m

Energy

5.95

9.04

0.25

0.19

0.25

0.25

Industrial Metals4

98

320

305

146

Precious Metals

33

6.1

Agriculture

58

7

96

-24

7

-394

-4.1

1.2

5.8

1 Monthly change is difference of close on last business day and close a month ago.2 Monthly volatility change is difference of average volatility over the past month and that of the prior month (3-mo ATM implied volatility, 1-mo realized volatili ty).3 Price forecasts refer to prompt contract price forecasts i n 3-, 6-, and 12-months time.4 Based on LME three month prices.

2.60 2.792.00 2.222.11 2.17 2.68 2.740.20 29.1 -10.0 1.94RBOB Gasoline $/gal 3.24 32.3

107.00Brent Crude Oil $/bbl 122.88 33.5 0.06 30.1 1.2 75.54 77.37 105.00 105.00

78.05 76.21

79.41 76.96 87.45 105.52

Historical Prices

76.13 78.88-8.1 103.5085.24 94.60 99.50 100.50

Volatilities (%) and monthly changes2Prices and monthly changes1

WTI Crude Oil $/bbl

Price Forecasts3

107.11 32.8 0.10 29.5

-1.10 26.4 -1.8 1.94

4.00 4.254.20 3.75

2.01 2.07 2.01 2.31 2.91 3.00

NYMEX Nat. Gas $/mmBtu 4.14 34.9

2.78 2.87USGC Heating Oil $/gal 3.17 30.3

4.23 3.981.93 33.6 -0.6 4.93

2.82 36.4 10.7 31.83

4.99 4.35

2200 22002365 2200

33.35 37.48 42.68 51.74 43.50 44.50

LME Aluminum $/mt 2643 22.3

56.77 42.00UK NBP Nat. Gas p/th 60.07 27.4

2122 2110-0.35 19.3 1.9 2037

0.17 24.3 -0.6 6677

2037 2199

19500 1950023619 19500

6677 7274 7042 7278 9600 11000

LME Nickel $/mt 26255 34.4

8614 9300LME Copper $/mt 9510 27.9

22431 212710.12 38.0 5.3 17593

0.27 29.8 -2.1 2241

17593 20163

1565 16901388 1480

2241 2307 2052 2043 2400 3100

London Gold $/troy oz 1455 15.5

2333 2400LME Zinc $/mt 2421 32.4

1228 1370-0.01 13.2 2.1 1099

1.78 39.3 0.7 17.6

1110 1197

750 750786 775

16.9 18.3 19.0 26.4 26.1 28.2

CBOT Wheat cent/bu 753 40.7

31.9 24.7London Silver $/troy oz 40.2 35.9

653 7071.80 46.0 4.5 522

1.56 29.5 -2.5 1002

496 467

780 700670 860

955 957 1035 1245 1575 1575

CBOT Corn cent/bu 756 41.8

1379 1500CBOT Soybean cent/bu 1334 28.7

422 5622.76 46.9 12.6 386

n/a 53.2 7.5 71

370 355

200 175257 235

76 81 87 128 125 125

NYBOT Coffee cent/lb 281 n/a

179 150NYBOT Cotton cent/lb 181 n/a

174 205n/a 31.8 -1.4 139

n/a 36.6 8.1 3259

134 140

20.0 20.030.5 25.0

3070 2987 2863 2856 2700 2700

NYBOT Sugar cent/lb 24.8 39.6

3307 2700NYBOT Cocoa $/mt 3066 n/a

20.2 29.0-3.06 44.0 -9.7 23.6

n/a 20.7 4.3 83.6

24.4 15.5

105.0 95.086.2 95.0

90.5 93.7 95.0 100.5 115.0 120.0

CME Lean Hog cent/lb 94.0 n/a

111.2 115.0CME Live Cattle cent/lb 118.3 n/a

69.7 81.9 79.7 71.2n/a 16.2 -17.6 57.8


S&P GSCIEnhanced Commodity Index and strategies total return and forecasts1

1YTD returns through March 31, 2011.

Source: Standard & Poors, Goldman Sachs Global ECS Research.

Current 12-Month

Weight Forward

(%) 2009 2010 2011 YTD 12-mo Forecast

S&P GSCI Enhanced Commodity Index 100.0 21.6 12.2 13.1 10.0

Energy 69.0 23.8 5.9 17.3 10.0

Industrial Metals 7.5 82.7 16.5 1.4 18.0

Precious Metals 3.0 25.2 34.5 4.4 13.0

Agriculture 16.0 3.6 33.7 5.9 7.0

Livestock 4.4 -11.3 18.5 7.2 2.0

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Growing conviction in N-T downside, but longer-term upside intact

Mounting downside risks to current exceptionally high crude oil prices areleading us to recommend an underweight allocation to commodities on a 3 to 6-month horizon, but we maintain an overweight on a 12-month horizon on

tightening fundamentals over the next year.Commodity returns have substantially outperformed, owing largely to the loss of Libyan oil

production and concerns that unrest in the Middle East and North Africa (MENA) could lead

to losses in another oil producing country (see Exhibit 1). However, while contagion risk

remains elevated, we maintain that crude oil prices have pushed ahead of where

fundamentals currently suggest and that the near-term downside risk to prices has risen in

recent weeks as oil prices have climbed to exceptionally high levels last seen in the spring

of 2008. Not only are there now nascent signs of demand destruction in the United States,

but also elections in Nigeria, a potential ceasefire in Libya and record market length on

contagion fears. Further, softening near-term base metals balances suggest that a stock-out

in copper inventories and associated price spikes has now been deferred beyond 2011, and

recent gold price strength has pushed us close to our near-term price targets. As a result,

we now recommend an underweight allocation to commodities on a 3 to 6-month horizon.

Exhibit 1:Commodity returns have substantially outperformed other asset classes in therecent period, owing largely to concerns over MENA contagion and an associated large oilsupply shockIndex levels

Source: S&P.

Reinforcing this shift is limited upside for base metals from current historically high levels,

in our view, largely owing to Chinese consumer destocking, tighter inventory management

and the negative shock to supply chains resulting from the earthquake in Japan, which

have softened near-term balances and have pushed out the timing of stock-out in the

tighter metals such as copper. We have also approached our near-term targets on gold.

Accordingly, the only sector where we see near-term upside is agriculture, with current

inventories at exceptionally low levels across many of the key grains.

540

590

640

690

740

790

840

1,000

1,050

1,100

1,150

1,200

1,250

1,300

1,350

1,400

1,450

1,500

Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov- 10 Jan- 11 Mar-11

S&P500 S&P GSCI (rhs)

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It is nevertheless important to emphasize that commodity returns still have upside on a 12-

mo horizon, particularly following the correction in oil prices that we anticipate, barring

further oil supply shocks. Barring further persistent increases in oil prices that damage

demand, we expect demand growth to continue to outpace supply growth, leading to

much lower inventories and OPEC spare capacity later next year, which would be hastened

should the Libyan outage persist.

In addition, we believe that stock-out for copper has been deferred, not avoided and is now

likely to occur during 2Q2012. We also expect low real rates will continue to lead gold

prices higher into 2012, before monetary conditions begin to shift gold risk to the downside.

Finally, we maintain that soybean price risk is skewed to the upside over the next year on

an expected deficit in the upcoming crop year and that price risk for other key grains is

substantially skewed to the upside given current low inventories. We therefore maintain an

overweight recommendation to commodities on a 12-mo horizon, but are lowering our 12-

mo return forecast to 10.0% from 14.3%. Further, we note that while we have lowered our

near-term allocation recommendation based on expected returns, the role of commodities

as a portfolio diversifier and inflation hedge increases its attractiveness in the current

environment, in our view.

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Energy: +6.3% from February 28, 2011 through March 31, 2011;+17.3% ytd through March 31, 2011

Petroleum

+6.4% from February 28, 2011 through March 31, 2011; +18.4% ytd through March 31,2011

Oil returns have led the complex as the unfolding events in MENA have pushed up Brent

crude oil prices from $100/bbl in mid-February to a recent peak of over $125/bbl. These

high price levels invite comparison to the spring of 2008, when crude oil prices first

breached these levels in May before peaking at over $145/bbl by early July. While there is

some similarity between now and then, notably a shortage of light-sweet crude oil, we

believe that there are fundamental differences between now and the spring of 2008:

Inventories are still well above normal levels, particularly in the United States,

where total petroleum inventories are still at the same levels as in 2009 / 2010.

OPEC spare capacity is significantly higher now. We believe that spare capacity

was effectively exhausted by June 2008. While global demand has surpassed pre-recession levels by a wide margin, global production capacity has increased more,

leaving close to 2 million barrels of OPEC spare capacity even following the loss of

Libyan production.

Concerns about the further spread of protests to other oil producing countries in

MENA have pushed market length to exceptionally high levels (see Energy Weekly:

Prices return to spring 2008 levels, but fundamentals not there yet, April 13, 2011).

Consequently, we continue to believe that --- even with the loss of Libyan production --- the

oil market has adequate inventory and OPEC spare production capacity to avoid the degree

of physical tightness experienced in 2008 well into next year. Although the contagion risk

in MENA remains elevated, and the oil markets ability to weather the loss of supplies from

another producer in the region is limited, we believe that prices have pushed ahead ofwhere fundamentals currently suggest and that the market will likely experience a

substantial correction in coming months, barring another supply disruption.

Further, while oil prices remain elevated on concerns of potential further supply losses, we

are increasingly wary that with prices back at spring of 2008 levels, we may be beginning

to see signs of the sharp drop in demand that led to prices plunging in the summer of 2008.

In particular, US motor gasoline demand has been declining counter-seasonally in recent

weeks (see Exhibit 2) as prices at the pump rose to near $3.75/gallon. Interestingly, it was

near this same price level that US motor gasoline demand declined counter-seasonally in

June 2008. Consequently, while the market remains focused on the upside price risk from

the potential for more supply losses, we are becoming increasingly concerned at the

potential downside risk from a sharp deterioration in demand at current price levels. On

net, we see fundamental risks becoming far more symmetric in the recent environment andbelieve that we will likely see a continued correction in crude oil prices toward our near-

term price targets, barring additional supply disruptions.

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Exhibit 2:US motor gasoline demand has begun to fall counter-seasonally as retail levelmotor gasoline prices push above $3.75/gallon, much like it did in June of 2008Thousand b/d (left axis); $/gallon (right axis)

Source: DOE and GS Global ECS Research.

However, we emphasize that barring persistent increases in oil prices that damage demand,

we expect demand growth to continue to outpace supply growth, leading to much lower

inventories and OPEC spare capacity later next year, which would be hastened should the

Libyan outage persist. We expect this tightening in physical markets to support higher

prices and higher commodity returns, particularly following the correction in oil prices that

we anticipate, barring further oil supply shocks.

Natural Gas

+4.4% from February 28, 2011 through March 31, 2011; -2.4% ytd through March 31,

2011

NYMEX natural gas performed well in March owing to a late round of winter weather that

helped push end-winter US inventory levels down to 1579 bcf, moderately lower than

expected. However, moderating weather and still-ample inventories heading into the

spring shoulder months for demand have pushed prices lower again in recent weeks (see

Exhibit 3).

Going forward, we continue to believe that US natural gas price upside is limited this year

and next as the potential on the production side remains impressive, especially if prices

should increase towards $5.00/mmBtu. Already at current prices, US production shows fewsigns of slowing on the contrary, it continues to grow (see Exhibit 4). Consequently, we

continue to see a need for coal-to-gas substitution in the region of 2 Bcf/d over the coming

summer to avoid breaching storage capacity, which will likely keep natural gas prices

under pressure in order to maintain its current discount to Appalachian coal prices.

Accordingly, we reiterate our average price forecasts of $4.00 and $4.25/MMbtu for 2011

and 2012, respectively.

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

8000

8200

8400

8600

8800

9000

9200

9400

9600

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2011 Demand 2008 Demand 2011 Price (right axis) 2008 Price (right axis)

5-year average demand (2003-07)

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Exhibit 3:A late round of winter weather resulted in agood performance for NYMEX natural gas in MarchLeft axis: HDDs; right axis: $/mmBtu

Exhibit 4:US production continues to growDry production, Bcf/d, weekly moving average

Source: Earthsat, NYMEX, Goldman Sachs Global ECS Research. Source: Bentek Energy.

Looking beyond 2012, however, several policy initiatives have generated increasingly

constructive conditions for natural gas demand and prices. Specifically, generation

demand for natural gas is likely to rise well beyond its normal trend growth in the next

eight years, as more stringent Environmental Protection Agency regulations will likely

result in the retirement of a significant portion of US coal-fired power generation capacity

(see our January 31, 2011 Natural Gas Weekly). Further, as the recent events in Japan have

led to renewed concerns regarding nuclear technology, the Nuclear Regulatory

Commission will perform a safety review of all US nuclear power plants, raising

uncertainty regarding license renewals and new construction plans (see Natural Gas

Weekly: Back-end rally to persist as nuclear concerns gain momentum, March 29, 2011).

In addition, the high oil price in recent months has led to renewed momentum for policies

aiming to increase the use of natural gas in the transportation sector. In particular, the NAT

GAS Act of 2009 has re-emerged in the political discussion. We estimate that if the ultimate

goal of the 2009 version of the bill that 10% of total vehicle sales in the United States will

be natural gas vehicles (NGVs) by 2018 is reached, the (cumulative) long-term impact on

natural gas demand could be significant, likely in the 11-13 Bcf/d range. However, we

believe that such a transition would take at least 20 years to complete and that its success

would remain dependent on adequate infrastructure being put in place, as we have argued

in the past.

On net, taking into account all the potential increases to US natural gas demand that could

result from these shifts in generation and transportation policy, we estimate that long-run

gas consumption can be up to 20 Bcf/d higher than what trend growth in generation andindustrial demand would suggest (see Exhibit 5).

3.70

3.90

4.10

4.30

4.50

5

10

15

20

25

01/03/2011 11 /03/2011 21/03 /2011 31/03 /2011 10/04/2011 20 /04/2011

2011 HDDs 10y average HDDs NYMEX natural gas

R ea lize d F ore ca st

46.0

48.0

50.0

52.0

54.0

56.0

58.0

60.0

62.0


2011 2010 2009 2008

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Exhibit 5:New policies affecting the transportation and generation sectors in the UnitedStates may potentially add 20 Bcf/d to long-term natural gas demand over the next 20years


Industrial Metals: -3.0% from February 28, 2011 through March 31,2011; +1.4% ytd through March 31, 2011

Industrial metals returns have remained lackluster in the recent period. Although we

continue to see a generally strong cyclical backdrop for metal demand, we maintain that

supply growth will likely outpace demand growth for most of the metals, limiting price

upside from current historically high levels. Further, the potential for a negative metals

demand shock stemming from higher oil prices and increasing expectations of monetary

tightening globally may also generate price headwinds. Nevertheless, we maintain that

energy and currency-related cost-push developments will likely keep prices supported at

historically high levels across the complex, despite relatively weak fundamental balances

(see Exhibit 6).

We continue to acknowledge distinctly tighter fundamentals for copper. However, the

combination of Chinese consumer destocking, tighter inventory management and the

negative shock to supply chains resulting from the earthquake in Japan, has moderated theexpected market deficit this year, pushing out the timing of a drawdown in copper

inventories to critically low levels beyond 2011, in our view (see Exhibit 7 and Metals

Weekly: Copper price spike likely deferred, not avoided, April 12, 2011). As a result, the

cyclical breakout that we had been expecting for copper in particular later this year is

likely no longer required to balance the market.

Event Potential impact Timing

NAT GAS Act +11-13 Bcf/d 2018-2030

Coal plant retirements +4-6 Bcf/d 2015-2018

Nuclear license renewals

and new-builds at risk+3.2 Bcf/d 2011-2021

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Exhibit 6:Energy and currency are providing cost-pushsupport to base metals pricesIndex (long-dated base metal index calculated by averaging5-year forwards for Al, Cu, Ni, Zn), left axis; $/bbl right axis

Exhibit 7:Sharp upside copper price risk deferred onlower expected inventory drawsRatio of 3-month copper prices to 5-year futures price(vertical axis); exchange inventories (horizontal axis)

Source: LME, NYMEX, Goldman Sachs Global ECS Research. Source: LME, SHFE, COMEX, GS Global ECS Research.

However, we maintain that Chinese end-use demand remains healthy, that consumers

have been eager to step into the market on price dips and that the copper market will most

likely remain in a meaningful deficit over the course of the year all suggesting that prices

are unlikely to fall significantly below the recent range on any sustainable basis. Further,

we are also mindful of the sharp rise in longer-dated copper prices well above levels that

can be explained by cost inflation or currency shifts, suggesting the market is still pricing

trend demand destruction needed to maintain balance in the supply-constrained market.

We agree with this view, and emphasize that the critically low inventory environment has

been deferred, not avoided. Accordingly, our 2012 balance reflects a decline in exchangeinventories to exceptionally low levels in 2Q2012. As a result, we maintain a 12-mo copper

price target of $11,000/mt.

Precious Metals: +3.7% from February 28, 2011 through March 31,2011; +4.4% ytd through March 31, 2011

After dipping below $1,400/toz after the Japanese earthquake, gold prices have recovered

and rallied to new highs of $1,473/toz, driving strong precious metals returns (see Gold set

to rally as events send US real interest rates lower, March 17, 2011). The gold rally

continues to receive strong support from low US real interest rates, with 10-year US TIPSyields remaining generally below 1.00% over the past month. Interestingly, while 10-year

US TIPS yields recovered quickly from the lows during the flight to safety in the bond

markets following the Japanese earthquake, the yields have been generally declining since

then, falling below 90 bp. With the 10-year US TIPS yield now well-below 1.00%, we would

continue to expect that net speculative length on COMEX futures will rise further,

supporting higher gold prices (see Exhibits 8 and 9). Net, with gold approaching our near-

term price target of $1,480/toz, we next see the gold rally continuing to our 6-month target

of $1,565/toz.

84

86

88

90

92

94

96

98

100

102

104

0.90

0.95

1.00

1.05

1.10

1.15

1.20

1.25

Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11

Long dated base metal price U SD Long dated oi l price

0.5

0.7

0.9

1.1

1.3

1.5

1.7

1.9

2.1

2.3

-400 -200 0 200 400 600 800 1,000 1,200 1,400 1,600 1,800

Current

GS Dec2011Forecast

PreviousDec2011forecast

End 1Q2011 expected

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Exhibit 8:US 10-year TIPS yields below 1% points tohigher gold pricesMillion toz (left axis); % yield (right axis, inverted)

Exhibit 9:Lower US real rates reinforce our constructiveview on gold pricesReal interest rates are the key determinant of gold pricesover the medium term under stable monetary demand

Source: FRB, CFTC, and Goldman Sachs Global ECS Research. Source: COMEX, FRB, Goldman Sachs Global ECS Research.

We continue to view the persistently low level of US real interest rates as the primary

driver of our bullish outlook for gold over the next 12 months, with US dollar-denominated

gold prices expected to peak in 2012 when rising US real interest rates remove this

fundamental support. Importantly, our bullish view of gold prices has not been based on

the expectation of substantial inflation in the near term, but instead on our US economists

forecast for US inflation to remain relatively subdued, averaging 2.5% in 2011 and 1.6% in

2012. Clearly, a higher level of inflation would present upside risk to our gold price

forecasts.

Our framework for evaluating gold prices related the real (inflation-adjusted) price of gold

to real interest rates and the monetary demand for gold from central banks and investors

(see our report, Frameworks: Forecasting gold as a commodity, March 25, 2009). As a

result, a higher rate of inflation would inflate our forecasted gold price in proportion to the

overall US Consumer Price Index (CPI), for a given level of US real interest rates and the

monetary demand for gold (see Exhibits 10 and 11). Although our US economists note that

core inflation data has been a little firmer than they expected, they maintain their forecast

for core inflation to remain around 1% as they believe that the pass-through from higher

commodity prices will be limited (see US Views: Messy, April 4, 2011). However, they

acknowledge that the risk to this inflation forecast is to the upside, which creates upside

price risk to our gold price forecast.

0.3%

0.6%

0.9%

1.2%

1.5%

1.8%

2.1%

2.4%

2.7%

3.0%5

10

15

20

25

30

35

J an -0 6 J ul-0 6 J an -0 7 Ju l-0 7 J an -0 8 J ul-0 8 J an -0 9 J ul-0 9 Ja n-1 0 J ul-1 0 J an -11

Net speculative length US 10 year TIPS yield (right axis, inverted)

US 10 yr TIPS yield Front-month gold price% per annum 2010 USD/toz

0.00 1832

0.50 1600

1.00 1397

1.50 1220

2.00 1066

2.50 931

3.00 813

3.50 710

4.00 620

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Exhibit 10:While US real rates have fallen below 1%...US 10-year TIPS yield (%)

Exhibit 11: inflation breakeven has continued to widenUS 10-year nominal yields minus US 10-year TIPS (%)

Source: FRB. Source: FRB.

While higher inflation presents an upside risk to our bullish gold price forecasts over the

next 12 months, this is counter-balanced by the risk that US real interest rates could rise

more quickly than we anticipate as the economic recovery continues. More specifically, if

US 10-year TIPS yields rise back to their February levels of 1.30% and US inflation remains

subdued, we would expect a slightly slower rally in gold prices than we have currently

embedded in our forecasts for the second half of 2011, which currently stand at $1,565/toz

and $1,690/toz in 6- and 12-months, respectively. Net, we continue to believe that gold at

current price levels is a compelling trade, not a long-term investment.

Agriculture: -2.7% from February 28, 2011 through March 31, 2011;+5.9% ytd through March 31, 2011

Agriculture prices and returns continued to rally in the first half of April on signs of

continued strong demand in the face of tight inventories. Although the US Department of

Agriculture continued to project a stabilization in old crop inventories in the April WASDE

(see Exhibit 12), we believe that further declines in old-crop inventories, especially for corn,

will keep crop prices elevated in the near term. Over the medium term, although we expect

exceptionally high farmer margins to generate a broad supply response in 2011/12, we

believe that the concurrent tightness across crop balances and our expectation for

continued strong feed and fuel demand will limit the recovery in inventories and points to

sustained elevated crop prices. Overall, in light of the USDA March 31 Grain Stocksand

Prospective Plantingsreports and last weeks WASDErelease, we reiterate our crop

outlook:

We expect further tightening in the 2010/11 corn balance on continued strong feed and

ethanol demand (see Exhibit 13). As a result, we forecast higher prices in the near term.

Although we expect a sequential decline in prices in 2011/12, we believe there is

upside relative to the current forward curve.

While the outlook for 2010/11 soybean ending stocks continues to improve on better

South American production and softer Chinese demand, we expect higher prices over

0.00

0.50

1.00

1.50

2.00

2.50

3.00

Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11

US 10-year TIPS

0.00

0.50

1.00

1.50

2.00

2.50

3.00

Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11

US 10-year inflation breakeven

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the next 12 months as we view soybeans as the crop most likely to remain in a deficit

in 2011/12 on lower acreage.

Despite the 2010/11 wheat deficit, inventories remain elevated and we expect range

bound prices in the near term but see upside risks to wheat prices and our forecast

over the medium term on 2011/12 production risks and potentially higher feed demand.

While we still expect a global supply response to push cotton prices lower over thenext 12 months, further tightening of the cotton old crop balances introduces upside

risk to our expectation for lower prices in the near term.

Finally, given the current tight old-crop inventories, we see the risk to prices as skewed to

the upside, especially for corn and cotton, as any supply disappointment will require

sharply higher prices to achieve sustainable demand destruction in the face of already tight

inventories.

Exhibit 12:The USDA continues to report a stabilizationin old-crop inventoriesUS and global stocks-to-use ratios

Exhibit 13:However, supportive margins keep ethanolproduction elevatedUS ethanol production (kb/d, rhs) US producer margin ($/gal)

Source: USDA, Goldman Sachs Global ECS Research. Source: EIA, NYMEX, CBOT, Goldman Sachs Global ECS Research.

We see three key stages in the coming months which will drive the crop outlook and in turn

crop prices:

Old-crop inventory tightness still looming. While the USDA continues to report

stabilization in old-crop inventories at low levels, strong near-term demand, especially

for corn from exports, feed and ethanol, points to further declines in inventories.

Planting is the first step of the supply response. Acreage intentions in the US came

mostly in line with our expectations with US farmers looking to increase corn and

cotton acreage to the detriment of soybeans. Planting has now effectively started and

weather is now the key to achieving acreage intentions.

Weather is key to the new-crop supply response. Weather this spring and summer

will be the key to the next large moves in grain prices as weather is key to determining

yields.

0%

10%

20%

30%

40%

50%

60%

US World US World US World

2010/11WASDEstockstouseratios

May June July AugustSeptember October November January

Corn Wheat Soybeans

650

700

750

800

850

900

950

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11

Ethanol margin US Production of Ethanol (monthly) US Production of Ethanol (weekly)

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Livestock: 4.3% from February 28, 2011 through March 31, 2011;7.2% ytd through March 31, 2011

After rallying strongly in March, livestock prices and returns eased in April on fears that

high meat prices, in particular beef, may start to weigh on domestic demand. We continue

to believe that tight livestock balances in 2011 on strong demand in the face of tight

supplies will continue to support prices.

Despite high feed and in turn livestock prices, we still expect that demand for meat will

continue to improve in 2011 as our economists forecast both stronger US economic growth,

which points to continued domestic demand recovery, as well strong EM GDP and income

growth, which should support US exports. On top of this already strong foreign demand,

we believe that US exports will be supported in 2011 by strong import needs by both

Japan where the tsunami and possible radiation put up to 20% of domestic meat

production at risk and South Korea, where the foot-and-mouth disease outbreak has led

to the culling of a quarter of the pig and cattle herd. With Japan and South Korea among

the largest importers of both US pork and beef last year, this points to further growth in

already strong import demand for US meat (see Exhibit 14).

On the supply side, high feed prices are weighing on margins and will likely spur farmers

to limit cattle and hog herd expansion. Although the USDAs Hogs and Pigs report pointed

to a small increase in the US hog herd, the USDA also reported that US hog producers

intend on farrowing 3% fewer sows over the next two quarters than last year. On the cattle

side, while better deferred margins have supported placement of cattle on feed, the share

of lightweight placement has been larger than normal, pointing to tighter feeder cattle

supplies and in turn likely lower placements in months ahead (see Exhibit 15). Further,

lightweight placements last fall and harsh weather conditions this winter have generated

lower carcass weights and in turn limited beef production growth despite increased

slaughter. On net, these releases confirm our expectation for tight supplies ahead in the

face of strong demand.

This outlook leads us to expect tight livestock balances in 2011 and we forecast lean hog

prices of 95, 105 and 95 cents/lb in 3-, 6- and 12-months respectively. For live cattle, we

expect prices of 115, 115, and 120 cents/lb in 3-, 6- and 12-monthv respectively.

Exhibit 14:Japanese and South Korean demand willsupport already strong US pork exportsUS pork exports (carcass wt. thousand pounds)

Exhibit 15:Lightweight cattle on feed placements haveincreased in 2011, pointing to tighter feeder cattle supplyShare of placements weighing less than 700 lbs

Source: USDA, Goldman Sachs Global ECS Research. Source: USDA, Goldman Sachs Global ECS Research.

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

Japan South Korea Other countries

30%

35%

40%

45%

50%

55%

60%

65%

70%


2011 2010 Median 5-year min 5-year max

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Commodities in a nutshell

Commodities Recent events/outlook and key issues 12-m priceforecasts

Energy

WTI Crude Oil US inventories remained at close to last years levels in March after having drawn sharply in 4Q2010. Moreover, the US oil

market itself has become increasingly fragmented by the high and rising level of oil inventories in the midcontinent. As aresult, WTI has been trading at a significant discount to other light sweet crudes, such as Brent and Light Sweet Louisiana(LLS). As the surplus of oil in the US mid-continent is not being driven by weak US demand, it will likely not be alleviated bythe ongoing recovery in US demand and will require a redirection of pipeline infrastructure to carry crude from the USmidcontinent to the US Gulf Coast to correct it and hence WTI prices will trade at a discount to Brent and LLS for longer.However, we believe that refinery shutdowns in the midcontinent have led to a shift from pricing a discount of the US mid-continent from the global oil market to pricing a dislocation, with Brent - WTI spreads peaking at to close to $20/bbl by mid-February. While Cushing inventories have in fact reached new highs, the fact that it took two months to get to these levels hassomewhat eased concerns that with the opening of the extension of the Keystone pipeline to Cushing, the mid-continentwould be instantly a washed in crude. Consequently, the dislocation has once again shifted back to a discount over the pastweeks, even though current WTI Brent spreads remain well above our short-term forecast. We expect that WTI will remainvolatile and prone to dislocations in the future until the pipeline infrastructure is improved, however, we continue to expectthat WTI-Brent will move back to near $7/bbl in the near term.

$103.50/bb

Brent Crude Oil Brent crude oil prices have breached $125/bbl for the first time since 2008 as global inventories continued to decline. However,we believe that the recent events in the Middle East and Africa have pushed prices ahead of where fundamentals currentlysuggest. Consequently, we continue to view a containment of the threat to oil production from the political unrest in theMENA region as the primary downside risk to crude oil prices in the near term. However, as we estimate effective OPEC sparecapacity at below 2 million b/d, any further supply shortfall still holds the potential for significant upside spikes in oil prices.

$107.00/bb

RBOB Gasoline While US gasoline margins look currently strong, this is mainly the result of depressed WTI prices as demand remains

seasonally weak. Consequently, gasoline margins look much weaker compared to other crudes such as LLS. While we expectUS gasoline demand to strengthen as the recovery in the US economy accelerates in 2011, we continue to believe that upsideis limited given ample refinery capacity in the system.

$2.79/ga

USGC Heating Oil Distillate margins remain relatively strong over the past weeks as the ongoing economic recovery in the United States haspushed demand above last years levels and diesel cracks remain supported as a significant share of Japanese refinerycapacity remains offline. However, as US distillate stocks still remain well above normal and even last years levels, we expectthat any further strength in distillate margins are likely transient. Going forward, we expect that strong export demand fromLatin America and Europe for US distillates will keep heating oil margins supported.

$3.00/ga

NYMEX Nat. Gas NYMEX natural gas prices are back down to around $4.00/mmBtu, as the winter is over and the market seems unconcerned bythe lower-than-expected end-of-winter inventory level. The underlying balance remains in a surplus driven by continuedgrowth in shale gas production. We therefore believe that any upside to prices will be limited by potential supply responsesand we maintain a bearish stance for this summer, reiterating our average 2011 price forecast of $4.00/mmBtu. Longer term,however, we remain constructive as nuclear safety concerns in the wake of the Japanese earthquake and tsunami as well aspolicy initiatives aiming to increase natural gas usage in the US transportation sector further increase the positive outlook fornatural gas demand already created by the coal plant retirements we expect in the coming years.

$4.25/mmBtu

UK NBP Nat. Gas UK NBP natural gas prices have performed well in recent months, as weather-related price strength over the first half of thewinter was accentuated by the events in the MENA region and Japan. These recent events pose significant upside risk to our$7/mmBtu (2011) and $8.50/mmBtu (2012) forecasts and may move forward the sustainable reconnection with oil-indexed

prices we currently have penciled in for 2H2012. However, more clarity is still needed concerning what incremental global LNGdemand will be sustainable in the long run.

44.50 p/th

Industrial Metals

LME Aluminum Although the earthquake-related events will have a clear negative impact on aluminum demand in Japan and more globally,particularly in the aluminum-intensive auto sector, higher long-dated energy prices are lending support given the energy-intensive nature of aluminum production and the markets focus on longer-term cost-push inflation. Thus, while the Japanevents will just exacerbate the current and expected aluminum market surplus, aluminum prices will likely remain supportedin the near-to-medium term on new challenges to the long-term energy crisis developing globally.

$2200/mt

LME Copper Although copper fundamentals have softened in the recent period owing largely to Chinese destocking motivated by highprices and low credit availability, the market has continued to focus on anticipated deficits given strong expected globaleconomic growth against limited supply growth. We believe that a short-term tightening impact from Japan and likely returnof Chinese buying (where there are already early signs of Asian markets tightening) will reinforce this focus, generatingdemand-pull support for the metal and keeping prices elevated above 9,000/mt. However, the combination of Chineseconsumer destocking, tighter inventory management and the negative shock to supply chains resulting from the earthquake inJapan, has moderated the expected market deficit this year, pushing out the timing of a drawdown in copper inventories tocritically low levels beyond 2011, in our view. As a result, the cyclical breakout that we had been expecting for copper inparticular later this year is likely no longer required to balance the market. Nevertheless, we maintain that the market will mostlikely remain in a meaningful deficit over the course of the year and that the critically low inventory environment has beendeferred, not avoided. Accordingly, our 2012 balance reflects a decline in exchange inventories to exceptionally low levels in

2Q2012. As a result, we maintain a 12-mo copper price target of $11,000/mt.

$11000/mt

LME Nickel The nickel market remains focused on near-term physical tightness, exacerbated by the earthquake-related supply disruptionin ferro-nickel markets. Looking at cancelled warrants in Asian LME warehouses and the continued decline in LME inventory,broad nickel markets still look to be in deficit, and refined nickel and specialty shape product still remains unusually tight fromnumerous supply-side disruptions in recent months, notably the continued disruptions in Canada and Western Australia. Weexpect this tightness to keep the market elevated in the near term, posing upside risk to our near-term forecasts. However, likecopper, we see limited upside from current levels, as growing nickel pig iron and ferro-nickel supplies should alleviate currenttightness in Asia, and refined production growth is still expected to accelerate as we move further into 2011. Although therecent tighter fundamentals suggest a risk of lower inventory build over the course of 2011, presenting moderate upside to ourforecasts, we maintain that medium-term price risk is skewed to the downside from current levels.

$19500/mt

LME Zinc Although Japanese disruptions are likely to tighten the near-term spot market, we believe this tightening will have a limitedimpact as the market is currently well supplied. However, the recent energy and currency developments should provide cost-push support to the metal. Further, we believe zinc is the metal most likely to see longer-term demand support fromrebuilding efforts in Japan, increasing long-term demand growth against limited structural supply growth. These factorssuggest modest upside to near-to-medium term zinc prices from current levels, consistent with our current price forecasts.However, we believe recent developments create downside risk to our view of a cyclically tight zinc market by the end of 2011,and, in turn, our late-2011 price forecasts.

$3100/mt

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Commodities Recent events/outlook and key issues12-m priceforecasts

Precious Metals

London Gold With the US Federal Reserve conducting a second round of quantitative easing and likely keeping its short-term nominalinterest rate target near zero through 2011, we expect the low US real interest environment, combined with continued gold-ETF and Central Bank buying will continue to provide support for gold prices 2011. In the near term, the ongoing events in

MENA and Japan should provide further support to gold prices and we reiterate our 3-mo $1,480/toz forecast. However, withthe current round of QE set to end in June 2011, and our US economics team now forecasting strong US economic growth in2011 and 2012, we expect US real interest rates to begin to rise into 2012, likely causing gold prices to peak. Should real ratesreturn to their February levels of 1.3%, we would expect a slightly slower gold rally than currently imbedded in our forecast forthe second half of 2011, which currently stand at $1,565/toz and $1,690/toz in 6- and 12-months, respectively.

$1690/toz

London Silver Over the long run, silver prices tend to track gold prices. Thus, our silver forecast reflects the historical ratio to gold. $28.2/toz

Agriculture

CBOT Corn Corn prices were supported over the recent period by continued signs of strong feed, ethanol and export demand. We expectfurther drawdown in old-crop inventories will push corn prices higher. As focus shifts to the new crop, we expect corn to winthis springs acreage battle. However, in the face of strong demand, we expect that average weather conditions will onlygenerate a modest build in inventories and in turn only a moderate decline in prices. In particular, we believe that any weatherdisappointment will likely push prices higher to generate the demand destruction that critically low inventories will require.

700 c/bu

CBOT Soybean Soybean prices have declined over the past month on the prospect for a looser 2010/11 global balance as better weather inSouth America has improved the regions production outlook while Chinese imports have recently been soft. In turn, thisrecent underperformance vs. corn and cotton has increased the likelihood that soybeans will lose acreage in the NorthernHemisphere this spring. This suggests a likely soybean deficit in the 2011/12 crop year and we forecast higher soybean pricesover the next 12 months.

1575 c/bu

CBOT Wheat Wheat prices were mostly range-bound with expectations for stronger feed demand offsetting larger global inventoriesreported by the USDA in the April WASDE. We expect a balanced wheat market in 2011/12 with still-elevated inventory levelsand slightly lower wheat prices. But risks remain high for new crop production, with dry conditions in the US plains and lowplanting last fall in Russia putting the winter wheat production at risk.

750 c/bu

NYBOT Cotton Cotton prices have remained elevated and range-bound since mid-February. Over the most recent period, expectations for asupply response in 2011/12 and signs of potential demand destruction helped offset the price impact of the lower US andglobal stocks-to-use ratios reported in the April WASDE. In the short term, we expect prices will remain elevated givencritically tight US and global inventories as strong EM demand has put the market in a deficit for the fourth consecutive year in2010/11 despite the large production rebound. Over the medium term, elevated margins offered by new crop cotton prices willincentivize higher cotton acreage in both the US, India and China, the three largest producers. This supply response underaverage weather conditions during the 2011/12 crop year should push prices lower and we maintain our 12-mo 125c/lbforecast although acknowledge that risks are skewed to the upside on any weather disappointment.

125 c/lb

NYBOT Coffee After trending lower in March, coffee prices rebounded sharply in April on signs that the La Nia weather pattern had a largerimpact than previously expected. Specifically, the ICO lowered its Indonesia production forecast and warned of potentiallylower East Africa production. The ICO at the same time increased its estimate for 2010/11 consumption, pointing to an onlymodest build on already very low Arabica inventories. With demand expected to continue to grow, led by emerging markets,the outlook for lower 2011/12 production on Brazils off year of the Arabica plant two-year cycle will likely support prices in2011. We are therefore raising our 3- and 6-mo price forecasts from 200 c/lb and 175 c/lb to 235 c/lb and 200 c/lb. Barring

weather shocks, we expect prices to decline over the longer term on an expected supply response to the current higher coffeeprices but acknowledge that higher cost of production in Brazil in particular will likely limit the downside to prices. Wemaintain our 12-mo price forecast of 175 c/lb.

175 c/lb

NYBOT Cocoa Cocoa prices stabilized over the past few weeks as signs of a resolution to Ivory Coasts presidential dispute were offset byconcerns that logistical issues would persist. Specifically, while the arrest of Laurent Gbagbo may signal the end of thepolitical conflict, reports of continued unrest in the country and the prolonged closure of banks and ports will likely delay theresumption of cocoa exports in coming weeks. As a result, we expect cocoa prices to continue to trade at a premium to our 3-mo $2,700/mt price forecast in the near term. However, as the situation normalizes we believe that prices will decline giventhis years large West African production which points to a market in surplus for the 2010/11 crop year and a global stocks-to-use ratio back to its highest level since 2005. Over the medium term, as demand continues to grow, the production outlook forthe Ivory Coast will remain key as aging orchards, poor infrastructure and political instability have curbed production andinvestment over the past few years. Further, while La Nia was beneficial to West Africa production, a return to neutralweather conditions suggests that 2011/12 production will not be as large as the current crop. In light of these challenges, weare raising our 6- and 12-mo price forecasts to $2,700/mt from $2,400/mt previously.

$2700/mt

NYBOT Sugar Sugar prices continued to decline in April, on signs for a record large 2010/11 output from Thailand and an improving outlookfor 2011/12 production in Brazil. Specifically, Unica now projects sugar output from the Center/South region up from 2010/11,pointing to potentially larger exports from Brazil. While low inventories in importing countries should keep demand strong,fading uncertainty about 2010/11 crop production and prospects for a large 2011/12 crop in Brazil, the largest producer, willlimit price upside in the near term. We further expect that low ethanol inventories in Brazil will incentivize sugar mills to shift

back to producing more ethanol in the short term and in turn limit near-term downside to sugar prices. As a result, we arelowering our 3-mo price target to 25 c/lb from 30 c/lb previously. Over the medium term, we expect a continued globalproduction response to current elevated prices under average weather conditions and we see downside to current prices andforecast 6- and 12-mo prices of 20c/lb.

20 c/lb

CME Live Cattle Live cattle prices remain near their highs on prospect for strong export demand, especially from Japan. And while higherplacement of cattle on feed point to higher supplies in early 2011, we expect the combination of high feed prices and strongexports to limit any significant cattle herd expansion. We expect this fundamental outlook to support live cattle prices athigher levels.

120 c/lb

CME Lean Hog Lean hog prices remained near their highs over the past month given the prospect for strong export demand, especially fromJapan. We expect domestic and foreign demand for pork will continue to improve against a back-drop of tight supplies as weexpect higher feed prices to limit herd expansion. We remain constructive on a 12-mo horizon for lean hog prices.

95 c/lb

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Exhibit 16:NYMEX WTI forward curves$/bbl

Exhibit 17:IPE Brent forward curves$/bbl

Source: Goldman Sachs. Source: Goldman Sachs.

Exhibit 18:NYMEX gasoline forward curvesCents per gallon

Exhibit 19:NYMEX heating oil forward curvesCents per gallon


Exhibit 20:IPE gasoil forward curves$/mt

Exhibit 21:NYMEX natural gas forward curves$/mmBtu


77.00

82.00

87.00

92.00

97.00

102.00

107.00

112.00

May-10 Aug-10 Nov-10 Feb-11 May-11 Aug-11 Nov-11 Feb-12 May-12 Aug-12 Nov-12 Feb-13

13Apr11 14Mar11 13Apr10

75.00

80.00

85.00

90.00

95.00

100.00

105.00

110.00

115.00

120.00

125.00

130.00


13Apr11 14Mar11 13Apr10

190.00

210.00

230.00

250.00

270.00

290.00

310.00

330.00

350.00


13Apr11 14Mar11 13Apr10

190.00

210.00

230.00

250.00

270.00

290.00

310.00

330.00

350.00


13Apr11 14Mar11 13Apr10

600.00

650.00

700.00

750.00

800.00

850.00

900.00

950.00

1000.00

1050.00

1100.00


13Apr11 14Mar11 13Apr10

3.50

4.00

4.50

5.00

5.50

6.00

6.50

7.00


13Apr11 14Mar11 13Apr10

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Exhibit 22:LME aluminum forward curves$/mt

Exhibit 23:LME copper forward curves$/mt


Exhibit 24:LME nickel forward curves

$/mt

Exhibit 25:LME zinc forward curves

$/mt


Exhibit 26:COMEX gold forward curves

$/oz

Exhibit 27:COMEX silver forward curves

Cents/oz


2,300

2,350

2,400

2,450

2,500

2,550

2,600

2,650

2,700

2,750

2,800


13Apr11 14Mar11 13Apr10

7,000

7,500

8,000

8,500

9,000

9,500

10,000


13Apr11 14Mar11 13Apr10

23,000

23,500

24,000

24,500

25,000

25,500

26,000

26,500


13Apr11 14Mar11 13Apr10

2200

2250

2300

2350

2400

2450

2500

2550


13Apr11 14Mar11 13Apr10

1050

1100

1150

1200

1250

1300

1350

1400

1450

1500

1550


13Apr11 14Mar11 13Apr10

1400

1900

2400

2900

3400

3900

4400


13Apr11 14Mar11 13Apr10

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Exhibit 28:CBOT wheat forward curvesCents/bushel

Exhibit 29:CBOT corn forward curvesCents/bushel


Exhibit 30:CBOT soybean forward curves

Cents/bushel

Exhibit 31:NYBOT cotton forward curves

Cents/lb


Exhibit 32:CME live cattle forward curves

Cents/lb

Exhibit 33:CME lean hog forward curves

Cents/lb


425

475

525

575

625

675

725

775

825

875

925


13Apr11 14Mar11 13Apr10

300

350

400

450

500

550

600

650

700

750

800


13Apr11 14Mar11 13Apr10

850

950

1050

1150

1250

1350

1450

Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13

13Apr11 14Mar11 13Apr10

55

75

95

115

135

155

175

195

215


13Apr11 14Mar11 13Apr10

80

85

90

95

100

105

110

115

120

125

130

Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12

13Apr11 14Mar11 13Apr10

60

65

70

75

80

85

90

95

100

105

110

May-10 Aug-10 Nov-10 Feb-11 May-11 Aug-11 Nov-11 Feb-12 May-12 Aug-12 Nov-12

13Apr11 14Mar11 13Apr10

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Exhibit 34:Performance of S&P GSCI Enhanced Commodity Index and Strategies through March 31, 2011

Note: As of March 31, 2011.


Index and strategies Dollar Base Date 31-Mar-11 1-Month 3-Month 12-Month

Weight = 100 Level 2009 2010 2011 YTD Change Change C hange

S&P GSCI Enhanced Index 100.00 Dec-69 805.7 21.6 12.2 13.1 3.9 13.1 28.1

Energy 65.18 Dec-82 1680.8 23.8 5.9 17.3 6.3 17.3 22.9Petroleum 57.33 Dec-82 1882.5 31.9 9.5 18.4 6.4 18.4 26.0

Industrial Metals 6.43 Dec-76 299.1 82.7 16.5 1.4 -3.0 1.4 13.1

Precious Metals 3.82 Dec-72 420.3 25.2 34.5 4.4 3.7 4.4 38.0

Agricultural 18.80 Dec-69 172.5 3.6 33.7 5.9 -2.7 5.9 70.8

Livestock 5.78 Dec-69 212.5 -11.3 18.5 7.2 4.3 7.2 19.0

Commodities

Energy

WTI 31.98 Dec-86 2138.8 31.9 7.5 13.9 7.5 13.9 19.0

Brent 12.69 Jan-99 2032.9 27.4 12.0 23.4 5.1 23.4 34.9

Unlead/RBOB Gas 3.39 Dec-87 2001.8 77.7 16.3 20.2 7.1 20.2 32.3

Heating Oil 4.82 Dec-82 1189.1 19.0 9.7 22.4 4.3 22.4 31.9

Gasoil 4.44 Jan-99 1374.0 23.5 11.4 27.2 5.4 27.2 37.0

Natural Gas 7.85 Dec-93 234.6 -34.4 -35.6 -2.4 4.4 -2.4 -21.4

Industrial MetalsAluminum 2.58 Dec-90 103.4 33.7 5.7 5.9 1.4 5.9 9.0

Copper 2.29 Dec-76 802.6 136.3 29.5 -2.0 -4.7 -2.0 20.5

Lead 0.33 Jan-95 671.6 132.4 0.5 6.9 6.0 6.9 23.1

Nickel 0.68 Dec-92 509.0 55.3 32.3 5.4 -10.0 5.4 3.6

Zinc 0.56 Dec-90 158.4 98.6 -9.0 -4.7 -6.7 -4.7 -5.3

Precious Metals

Gold 3.49 Dec-77 379.4 23.0 28.8 1.1 2.0 1.1 28.3

Silver 0.33 Dec-72 776.5 47.8 82.0 22.4 12.0 22.4 114.3

Agriculture

CBOT Wheat 5.20 Dec-69 122.8 -24.4 23.2 -0.8 -4.7 -0.8 47.6

KBOT Wheat 1.23 Jan-99 115.4 -23.9 41.7 5.5 -0.5 5.5 77.8

Corn 4.93 Dec-69 148.9 -9.3 31.9 9.6 -4.4 9.6 75.5

Soybeans 3.19 Dec-69 422.5 19.3 33.8 -0.2 3.3 -0.2 50.6

Cotton 1.06 Dec-76 72.9 32.2 94.5 41.0 4.7 41.0 163.2

Sugar 1.84 Dec-72 309.7 86.3 20.5 -9.3 -7.9 -9.3 71.7Coffee 0.90 Dec-80 90.4 10.7 67.7 9.0 -2.8 9.0 85.1

Cocoa 0.45 Dec-83 119.4 18.6 -12.4 -3.0 -20.1 -3.0 -4.7

Livestock

Live Cattle 3.36 Dec-69 214.0 -5.6 19.4 5.4 4.7 5.4 19.5

Feeder Cattle 0.63 Jan-02 156.6 -3.9 19.7 9.9 4.7 9.9 15.2

Lean Hogs 1.79 Dec-75 215.3 -22.8 16.7 9.6 3.5 9.6 19.3

Total Returns (%)

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Exhibit 35:Performance of equity and bond total returns indices through March 31, 2011

Note: As of March 31, 2011.


Total Returns in USD (%)

31-Mar-11 1-Month 3-Month 12-Month

Indices Level 2009 2010 2011ytd Change Change Change

Equity Indices (Quoted)

US S&P 500 2,239 26.46 15.06 5.92 1.46 5.92 15.64Canada S&P/TSX Composite 38,434 59.03 24.08 7.62 (0.18) 7.62 25.29UK FTSE 100 3,897 43.01 9.19 3.51 (1.51) 3.51 13.53France CAC 40 7,893 31.67 (5.98) 10.93 1.09 10.93 9.52Germany DAX 7,041 27.83 8.52 7.73 0.25 7.73 20.00Japan Topix 1,103 4.72 15.93 (4.24) (8.14) (4.24) 2.38HK/China Hang Seng 49,366 56.57 8.30 2.39 2.53 2.39 14.06Australia S&P ASX 200 35,632 76.76 15.76 4.14 2.87 4.14 16.54Singapore STI 3,468 75.29 24.22 (0.76) 3.51 (0.76) 22.80

Region (USD)

All Country World Index 571 35.41 13.21 4.53 0.75 4.53 14.63The World Index (DM) 4,501 30.79 12.34 4.91 0.05 4.91 14.03

EAFE 5,406 32.46 8.21 3.45 (1.51) 3.45 10.90Europe 832 38.50 5.07 6.84 0.30 6.84 13.81

Emerging Markets (EM) 2,105 79.02 19.20 2.08 5.35 2.08 18.77

Country (USD)

USA 4,670 27.14 15.45 5.96 1.54 5.96 16.03Canada 6,906 57.36 21.21 7.80 (0.23) 7.80 23.10France 6,636 33.26 (3.23) 10.58 1.20 10.58 11.33Germany 5,911 26.56 9.32 7.57 0.38 7.57 20.71Italy 1,211 28.00 (14.07) 13.77 0.08 13.77 5.44Netherlands 14,172 43.04 2.17 10.54 2.57 10.54 14.05Spain 4,936 45.07 (21.13) 13.80 0.77 13.80 5.87Switzerland 10,056 26.61 12.86 1.91 (1.92) 1.91 10.14United Kingdom 6,350 43.37 8.80 3.79 (1.55) 3.79 13.59Japan 4,412 6.39 15.59 (4.85) (8.64) (4.85) 1.60Hong Kong 41,129 60.15 23.23 (0.41) 1.66 (0.41) 19.82Singapore 10,919 74.00 22.16 (0.63) 4.13 (0.63) 22.95China 102 62.63 4.83 2.88 4.64 2.88 9.58Korea 638 72.06 27.15 7.56 12.18 7.56 31.47

Region

World 878 2.55 5.17 0.46 (0.11) 0.46 7.07European Union 199 5.50 (6.21) 5.11 1.48 5.11 2.90G7 858 0.75 6.30 0.72 (0.07) 0.72 8.51

Country

USA 688 (4.12) 5.16 0.15 (0.13) 0.15 4.67

Canada 1,203 14.51 11.34 2.69 0.42 2.69 10.08United Kingdom 1,227 10.23 2.97 4.14 (0.99) 4.14 12.42France 1,499 4.10 (2.27) 4.15 1.16 4.15 6.10Germany 1,119 3.08 (1.37) 3.77 1.03 3.77 6.39Italy 1,488 9.46 (7.88) 6.99 2.34 6.99 3.05Netherlands 1,191 5.07 (1.41) 3.76 1.04 3.76 6.27Switzerland 926 4.90 14.84 0.83 0.84 0.83 17.42Japan 925 (1.83) 16.10 (2.15) (0.91) (2.15) 14.16

Citigroup World Government BondIndices (USD)

MSCI Equity Indices

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