Commodities have broadly pulled back from their recent peaks, but Wall Street analysts say the fundamentals are pointing to another rally by year-end.
, which highlighted in a research note Thursday that"irrational expectations make for unsustainable prices," arguing that the model for commodity pricing is broken at present.together, demand beats expectations and supply disappoints," said Goldman's Global Head of Commodities Research Jeff Currie.
Should this prove incorrect and this excess supply fail to materialize, however, he suggested that the restocking scramble would drive scarcity and push up prices substantially in the fall. This may force central banks to tighten monetary policy more aggressively and inflict a more prolonged economic contraction.
"In our view, macro markets are pricing an unsustainable contradiction — it is difficult to square a softening FCI [Financial Conditions Index], a more accommodative Fed pivot, falling inflation expectations and drawing commodity inventories."With the 2-year/10-year U.S.
Conversely, when a fundamental slowdown is underway, commodity markets are"generally in contango and physical supply chains are debottlenecking," Currie explained.
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