(Bloomberg News) Goldman Sachs Group Inc. foresees a 29 percent return over the next year from the Standard & Poor's GSCI Enhanced Commodity Index, led by energy and industrial-metals investments.

European policymakers will be able to contain the euro-area debt crisis, while recovery in the U.S. and China is set to continue, Jeffrey Currie, head of commodities research in New York, said today in a report. Returns may be 41 percent in a year for energy investments, compared with 23 percent for industrial metals and 18 percent for precious metals, while agriculture is forecast to lose 14 percent, the report showed.

"Although the macroeconomic backdrop still remains uncertain, particularly in Europe, we believe that the selloff in commodity prices is likely overdone and the price risks are shifting more to the upside," Currie wrote.

Commodities as measured by the S&P GSCI Enhanced Commodity Index dropped 13 percent in May and are down 9.1 percent this year on mounting concern that Europe's widening debt crisis will derail global growth and curb demand for commodities. Coffee, natural gas, cotton and crude oil paced declines.

Goldman Sachs cut its three-month outlook on commodities to neutral from overweight on March 28, while sticking with an overweight recommendation for a one-year period. Commodities may return 13 percent in a year, the bank said in April.

Currie correctly advised investors to reduce commodity holdings on April 15, 2011, before prices slumped 6.9 percent in May, the first monthly drop in eight. On March 29, 2011, Currie said commodities may rise more than estimated 14.3 percent in 12 months. Goldman in December closed its recommendations to buy the June 2012 copper at a loss of $1,530 a metric ton and the December 2012 zinc at $298 a ton. Only two out of seven Goldman's trading recommendations are currently making a profit.

Copper, Gold

Crude, gas, copper, aluminum and gold are the bank's top picks, according to the latest report. Copper stockpiles are declining, especially in leading global consumer China, and the oil market is tightening, Currie wrote.

Still, Goldman Sachs lowered three-month price forecasts to $8,000 a ton from $9,000 for copper and to $2,200 a ton from $2,400 for aluminum, according to a separate report today.

Speculators cut combined bullish bets across the S&P GSCI index by 13 percent to this year's lowest level in the week ended June 5, Commodity Futures Trading Commission data show. Hedge-fund bets on declines in copper futures are the highest since March 2009, according to the CFTC.

"The financial participation in many markets is now below what is consistent with the underlying market fundamentals," Currie wrote. "Physical deleveraging has been an ongoing process, particularly in Europe since the fourth quarter of last year, as funding costs remain high."