Demand for gold surged to an 11-year high last year. This is due to large-scale purchases on the back of high activity by retail investors and a slowdown of ETF outflows.
Head of commodities research at Goldman Sachs Group Inc. Jeff Currie believes that commodities have the best outlook among other asset classes this year. This forecast is driven by favorable macroeconomic factors and critically low reserves of almost every key commodity.
During his speech in London earlier this week, Currie noted that the year has started with a decline in prices caused by unexpectedly mild weather conditions for the winter period. At the same time, now there is a rise in China’s demand, which might eventually face insufficient supply. Consequently, prices might increase over the year.
According to Currie, these forecasts for commodities are more than optimistic this year. Shortages of supply are evident in every market, with critically low reserves or exhausted production capacity.
Currie draws a parallel between the current situation and a sharp increase in commodity prices during the crisis of 2007–2008 for getting more clarity. He also outlines some exceptions. For example, European reserves of natural gas are enough to provide the functioning of all necessary processes during the year.