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Jeffrey Currie – Providing Some Free Goldman Sachs Commodity Advice

May 16, 2011 | About:
CanadianValue

CanadianValue

210 followers
I’m sure over the past few months you have noticed Goldman Sachs making much publicized calls on the direction of commodities, oil in particular.

First they called for a correction in the price of oil, recommending that clients take money out of the sector. And then immediately after that correction Goldman came out with a long-term bullish call indicating they see the oil market getting very tight early in 2012.

Must be nice to make directional calls on a weekly basis!

The man behind Goldman’s commodity team spoke with Bloomberg and provided some interesting comments.

http://www.bloomberg.com/video/69731364/

Some observations:

- Goldman remains bullish but thought the market had got ahead of itself.

- Structurally bullish (which they are) means that looking out 6 to 12 months they think that demand is going to be outpacing supply drawing down inventories.

- Still cautious near term expecting volatility as the macro data is mixed and there is still a cloud over China.

- Expects that cloud over China to disappear as inflation comes off due to monetary policy at which point commodity markets should get very bullish.

- Thinks the worst of emerging market inflation is behind us.

- Thinks recent oil sell-off made sense as some of the concern over Middle East conflict especially in Saudi Arabia had eased.

- Once volatility comes out of oil expects upward trend to resume.

- Near term likes gold and agriculture.

- Thinks gold prices sovereign default risk which supports prices. Sees $1,600 this year and $1,700 next year.

- Agriculture already has physically tight markets (in contrast to oil which will be tight in 6 to 12 months). Any type of weather shock will cause big price moves as inventory is so low

- Copper has been de-stocked in China, which has led to lower prices as demand in the market is eased. Expects that to have basically finished. Thinks close to a near term bottom.

- On IEA trimming 2011 demand, thinks as soon as prices ease from $4 per gallon prices simply pop back up again

About the author:

CanadianValue
http://valueinvestorcanada.blogspot.com/

Rating: 2.3/5 (3 votes)

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