Yet, regulatory scrutiny and logistical management may make some aspects of the business too cumbersome for Goldman Sachs to manage.
Goldman Sachs became a player in the commodities business after its 1981 purchase of J. Aron & Company, a commodities trading firm. Goldman Sachs CEO Lloyd Blankfein started his career at J. Aron and its CFO, Harvey Schwartz, is also an alumnus of the firm.
In 2014, Goldman Sachs generated $15.197 billion in net revenue in its institutional client services division that houses the bank's fixed income, currency and commodities activity, with that division contributing $8.461 billion. Total net revenue for the bank was $34.528 billion.
Much of the bank's commodities revenue comes from market making or trade facilitation activities. In addition to facilitating the trading of commodities, Goldman Sachs has at various points taken physical ownership of commodities as well as the means of production and storage.
In recent years, that practice has come under scrutiny following several high-profile cases. The bank held a position in Metro Trade Services International, a Detroit-based warehouse company that stored aluminum.
A 2013 New York Times investigation of the banks' aluminum business claimed that the bank manipulated prices by creating artificial shortfalls in supply. The bank shed its position in Metro soon after the report. While the bank was not penalized for its involvement with Metro, the report was used in November as evidence in a Senate investigation into the appropriateness of banks' roles in the commodities business.
Federal Reserve Governor Daniel Tarullo testified at the Senate hearing about the environmental and logistical risks posed by banks engaged in the physical commodities business. He also said the Fed plans to issue rules for banks later this year that would address the risks he sees. These rules could take the form of higher capital requirements that would make the business less profitable.
Goldman Sachs is now in talks to sell its two Colombian coal mines -- perhaps even at a loss -- after a series of labor, environment and regulatory issues made the position untenable. Goldman Sachs bought the first mine in 2010 for $151 million and the second one in 2012 for $407 million.