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“’This ship has sailed. If you look at all the classic tell-tale signs of a structural bull market, you’ve got the weak dollar, grain prices … a customer named “bitcorn” recently, and then what’s going on in the metals markets. ‘ ”- Jeffrey Currie, Goldman Sachs
That’s Jeffrey Currie, Goldman’s head of commodity research, who told Bloomberg in a television interview Thursday why he is confident that a “structural bull market” in commodities is underway. Currie last fall outlined a case for being overweight “medium term” in commodities, including structural underinvestment in the old economy, policy-driven demand, and macroeconomic winds in favor of a weak dollar and rising risks. inflation.
Other commodity bulls have sounded a similar theme, making the case for commodities ending a multi-year slide and perhaps starting a long-term bull cycle. See: How a Weaker Dollar Could Help Fuel a Commodity Boom in 2021 Commodity prices crushed in 2020 when the COVID-19
pandemic pushed the global economy into recession in February and March. Oil prices tumbled, with a contract expiring soon for the West Texas Intermediate crude trade, and stabilizing, in negative territory for the first time in April. The Bloomberg BCOM Commodity Index, + 0.74%, which tracks 23 commodity futures markets, traded at a record low in April based on data dating back to 1991, according to Dow Jones
Market Data. The index bounced off its lows, rising at year-end, but still suffered a 3.7% annual loss, according to FactSet. The index is already up almost 4% in January, and some components are skyrocketing: C00 corn futures, + 2.10%, which Currie’s nutty client dubbed “bitcorn,” is up more than 10% in that goes this month. S00 soybean futures, + 1.96% are up more than 9%. Both received an additional boost earlier this week after US government data highlighted supply shortages and concerns about soon-to-be-harvested crops in South America. Oil futures have defied expectations of a more gradual recovery, with the US benchmark CL00, + 0.72%, jumping more than 9% since the calendar turned to 2021, while the index of global benchmark, Brent BRN00 crude, + 0.25% has risen more than 8%. . Metal prices are also on the rise, pushing copper HG00, + 1.37%, more than 4%. Commodities Corner: Here’s What Ahead of Industrial Metals, Following the 2020 Rally for Steel, Iron Ore and Copper Stocks have seen significant gains too, with the Dow Jones Industrial Average DJIA, + 0.37% to around 1.9% so far this month, while the S&P 500 SPX, + 0.19% has gained around 1.7%. and both indexes have published new records. Currie said that commodities, as an asset class, are better prepared than commodity-related stocks to capture any sustained spike in inflationary pressures as COVID-19
vaccine distribution increases and governments add more stimulus
. fiscal to the policy mix. President-elect Joe Biden
is expected to introduce an aid spending program worth about $ 2 trillion later Thursday, in addition to a roughly $ 900 billion package approved last month. While financial assets “anticipate the future,” commodities are spot assets that increase “as a hedge against potential inflation” and reflect “unforeseen physical movements in the real economy,” Currie said. The economy is likely to “physically take off” with the vaccine-related improvement in economic activity. “It will want to be long cash assets, real assets, so we prefer commodities over commodity-related stocks,” he said.