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Emerging Inflation Will Give Commodities A Boost - JPMorgan

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Emerging Inflation Will Give Commodities A Boost — JPMorgan

(Kitco News) - A quicker inflation pace in the U.S. will give a helping hand to commodities, including the precious metals, JPMorgan Chase & Co. said in a report.

“Rising inflation is beneficial for commodities. In fact, metals, both base and precious, exhibit their best performance (both outright and volatility-adjusted) when inflation has reached the [Federal Reserve’s] 2 percent target and continues rising,” the bank said in a report published this week.

JPMorgan sees increased bets on precious metals, copper, zinc and nickel. The bank also projects that if this bull market continues within the metals space, it could mark one of the strongest periods for prices.

Rising inflation is very much expected this year, JPMorgan noted, citing improving U.S. wage data and January’s core consumer price inflation.

JPMorgan’s positive commodities outlook echoes that of “Bond King” Jeffrey Gundlach and Goldman Sachs.

In the end of January, DoubleLine Capital CEO Gundlach reiterated that commodities are one of the best buys in 2018, adding that the gold price chart is going to break higher. 

“The gold chart looks a lot like the commodity chart, like it’s pacing out, about to break higher. And with the dollar getting weaker, I think you stay with that systematic positioning. I’ve been recommending gold for a couple of years,” Gundlach said during a webcast dedicated to discussing DoubleLine Strategic Commodity Fund.

Some of the main reasons to invest in commodities this year include diversification and hedging against inflation, according to Gundlach.

“[Commodities’] potential low-to-uncorrelated returns source to traditional asset classes,” he said. “Physical assets have historically tended to move in line with broad inflation measures.”

Global head of commodities for Goldman Sachs, Jeffrey Currie, also told CNBC back in January that 2018 is looking great for commodities. 

“For the first time in years we have a positive carry to own commodities more broadly,” Currie said.

The reason for this is a favorable macro backdrop, which Currie described as the “best in decades for owning commodities.”

On top of that, Goldman said in its February’s report that it sees gold prices pushing to $1,350 an ounce within three months, rallying to $1,375 within six months, and pushing to $1,450 an ounce by next year. 

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.