LONDON (Reuters) – The end of quantitative easing (QE) will have a negative impact on gold, but demand for oil and industrial metals should be supported if there is real economic growth, said Jeff Currie of Goldman Sachs (GS.N).
“Gold should directly reflect what has happened with QE, and we should see a substantial pullback,” said Currie, who heads commodity research at the investment bank.
Speaking at a Platts oil conference on Friday, Currie said precious metals had run up on the back of quantitative easing, which had debased paper money.
Oil and industrial metals, on the other hand, have risen due to fears of supply shortages. If real, sustainable economic growth has been generated off the back of QE, there may be some slowing of this growth, but it should still support demand for industrial commodities, he said.
“We think we are at least 12 months away before we see some of these physical issues beginning to resurface, which is why we argue for a correction in the near term,” said Currie.
“But if the economy holds together, we’d argue that oil will start to look like agriculture, with real physical shortages and much higher prices.”
Currie said agricultural commodities are already at critical shortages, but oil won’t get to this stage until 2012.
“The emerging markets have already crowded out the developed market demand for copper, and you will see the same dynamic play out in oil over the next decade,” he argued.
“The end game has to be a policy response, because we’re dealing with a situation in which there are political constraints on the free flow of investment.