GS: Commodities
Posted by Tango
on February 17, 2022, 7:28 pm
Despite an environment of slowing economic growth, fading fiscal support and hawkish pivots by central banks, commodity prices across the board — ranging from oil and metals, to grains, corn and soybeans — are surging. The drivers stem from a supply and demand imbalance that’s likely to persist even in the face of slowing economic growth, says Jeff Currie, global head of commodities research in Goldman Sachs Research, on an episode of Exchanges at Goldman Sachs. “We cover 27 commodities that go into the index,” Currie explains to host Allison Nathan. “Every single one of them is in a deficit. Inventory is declining — near critical operating levels. And high, spiky prices with steep levels of backwardation…That is telling you you're out of this stuff.” And there's still room for commodities to move higher, he says, given a lack of capital expenditure that is constraining supply and a long-term structural rise in demand stemming from policies aimed at addressing income inequality, climate change and supply chain resiliency. Such forces are creating an opportune time to invest in commodities, he adds. “I am utterly baffled right now [with] the lack of interest in this space,” Currie says. “Whether it's in the commodity equities, the credit, the actual physical commodities themselves. The only demand that exists in this space is the actual real, physical demand from people who need to use this.”
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