Latest / Bloomberg Intelligence / S&P's Gunzberg on Commodities Rally, Gold Could See 1800(Audio)

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S&P's Gunzberg on Commodities Rally, Gold Could See 1800(Audio) · Bloomberg Intelligence

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  Speaker 1: on Bill Maloney. Charlie all right, thank you very much,
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  Speaker 1: I'm Charlie. That's a Bloomberg business flash. This is taking
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  Speaker 1: stock with Gathlee Mays and grim Box on Bloomberg Radio
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  Speaker 1: weakness and commodities. That was one of the biggest features
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  Speaker 1: helping to drive markets around the world as went into
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  Speaker 1: But our next guest says, now it looks like those
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  Speaker 1: commodities may have definitively bottom. We're very happy to welcome
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  Speaker 1: back to the show, Jodi Gunnsberg. She's global head of
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  Speaker 1: Commodities at SMP DOWD Jones in diseased. Jody, welcome back.
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  Speaker 1: Thank you for having me. Well, I can start with
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  Speaker 1: oil because that is certainly the commodity on just about
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  Speaker 1: everybody's radar screen. Is consumers and investors crewed hitting a
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  Speaker 1: seventh month high in London on signs that the global
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  Speaker 1: gut that has been such a big downward pressure on
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  Speaker 1: oil is contracting more quickly than projected. It is, and
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  Speaker 1: it's coming um, you know, as opposed to many people
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  Speaker 1: feeling like there's a slowdown in Chinese demand growth. That's
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  Speaker 1: really not driving oil UM. What we're watching is the
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  Speaker 1: key swing factors on the demand side is the strong
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  Speaker 1: demand um coming from India. In fact, it's taken over
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  Speaker 1: China's post the biggest demand growth in the world. And
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  Speaker 1: on the supply side, we're really watching the declines in
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  Speaker 1: the US inventories, which are starting to happen as the
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  Speaker 1: producers have begun um cutting back. And more broadly, UH,
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  Speaker 1: I just want to you know, look at UH commodities,
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  Speaker 1: you know, losing one percent per day in the first
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  Speaker 1: twelve trading days of SI. That was a lot because
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  Speaker 1: of this big focus on China, but they're now up
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  Speaker 1: almost thirty percent off the bottom you point out in
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  Speaker 1: a recent report, and they just posted their biggest three
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  Speaker 1: month gain of eighteen percent, the biggest in July two
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  Speaker 1: thousand nine. So it's not just oil commodities broadly. Well,
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  Speaker 1: I would say that this could be considered a year
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  Speaker 1: of extremes of nothing else because um, as you just mentioned, yes,
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  Speaker 1: we had the worst start this year to any year,
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  Speaker 1: losing more than a percent a day in the first
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  Speaker 1: twelve dating trading days, and then off the bottom, it's
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  Speaker 1: been the fastest rebound ever. Uh. The index gained almost
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  Speaker 1: nine percent in just forty days off the bottom in January.
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  Speaker 1: Now they're up almost thirty percent off the bottom and
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  Speaker 1: posted their biggest three month gain over eighteen percent since
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  Speaker 1: July two thousand nine when they returned. And the reason
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  Speaker 1: that this is so important is because we've only seen
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  Speaker 1: gains this big happen at other bottoms, and at all
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  Speaker 1: of the other bottoms we've seen gains this big, Well,
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  Speaker 1: it's very important. Commodities are now beating stocks, out performing
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  Speaker 1: stocks for the first year since two thousand seven. Your
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  Speaker 1: research shows that when this starts happening, this trend can
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  Speaker 1: go for a while. It can. We saw the longest
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  Speaker 1: stretch of equity outperformance over commodities ending in that was
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  Speaker 1: eight years straight. The last time we saw that long
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  Speaker 1: of a stretch even close with seven years eighty from
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  Speaker 1: the eighties six. When the cycle switched for the following
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  Speaker 1: three years, commodities returned almost three outperforming stocks every year
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  Speaker 1: through ninth nine. So is this a good time to
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  Speaker 1: invest in commodities? Well? As the uncertainty around stocks continue
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  Speaker 1: and investors might look for an asset class with potentially
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  Speaker 1: similar returns and risk profiles over the long term, it
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  Speaker 1: could be a good time to switch. And and particularly
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  Speaker 1: from the uncertainty is um around the Brexit vote, the
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  Speaker 1: week unemployment numbers, the flow GDP growth, these are all
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  Speaker 1: concerning points that may continue to hurt stocks. But from
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  Speaker 1: the commodities perspective, there's still a minimum floor for the
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  Speaker 1: basic natural resources and seasonally as we enter the summer,
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  Speaker 1: the commodities tend to perform well from the increased consumption
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  Speaker 1: across the board, from food to construction to gasoline. And
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  Speaker 1: now we've got an extra added benefit from the post
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  Speaker 1: Almeno period. And Jennie the Faid Janet Ellen sounds like
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  Speaker 1: she's in no hurry to raise the key rate. Ward
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  Speaker 1: McCarthy from Jeffreys on the show today saying that that
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  Speaker 1: that next rate increase doesn't come till September at the earliest.
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  Speaker 1: Does that help commodities says, to help this rally? Uh,
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  Speaker 1: what are the rates increase or not? Is mixed for
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  Speaker 1: commodities at this point. I don't think that it's a
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  Speaker 1: major factor driving commodities because it's been so well telegraphed um.
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  Speaker 1: But historically, rising a rate or high interest rate environments
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  Speaker 1: are good for commodities because they increase the expected inflation
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  Speaker 1: plus the real rate of return, and they also add
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  Speaker 1: on to the collateral return from the commodities investments gold.
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  Speaker 1: What's gold going to do? Is gold going to hit
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  Speaker 1: the previous highs? Well, investors love to feel the safety
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  Speaker 1: of gold in in the volatile times, and um not
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  Speaker 1: only for the factors that I had just mentioned, but
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  Speaker 1: um also the extra uncertainty and volatility coming around the
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  Speaker 1: election year is making the demand for gold pick up.
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  Speaker 1: And based on the history three again, if I look
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  Speaker 1: at the path index performance, it looks like gold could
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  Speaker 1: go well into the eighteen hundreds. Wow, and gold training
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  Speaker 1: today's spot golds at twelve forty eight and change. So
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  Speaker 1: there's still a ways to potentially go if gold continue
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  Speaker 1: this pattern in the volatile time. Jodi Gunsberg, thank you
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  Speaker 1: so very much. Commodities are in rally mold, They're beating stocks,
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  Speaker 1: and this trend could continue for a while. She's Global
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  Speaker 1: head of Commodities at SMP Dow Jones in disease. Great
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