Gold will probably be among the biggest winners from quantitative easing, say JPMorgan Chase & Co., Standard Bank Group and Credit Suisse Group AG. Some investors buy bullion as a hedge against inflation and a weaker dollar. The metal, which reached a six-month high of $1,779.50 an ounce yesterday, will advance to a record $2,400 by the end of 2014, assuming the stimulus lasts until then, Bank of America Corp. said.
“We view owning commodities and gold in particular as more attractive post the QE3 announcement,” said Walter “Bucky” Hellwig, who helps manage $17 billion at BB&T Wealth Management in Birmingham, Alabama. “While the QE is there, it does keep the bid under commodities prices and gives them an opportunity to continue to move higher even with a sluggish economy.”
Central-bank action should boost prices across precious and industrial metals, JPMorgan said in a report Sept. 14, citing a probable decline in the dollar. Gold, silver, Brent crude oil and aluminum will probably rally more than other commodities, Standard Bank said in a Sept. 17 report.
Commodities also may rally because of supply cuts. Morgan Stanley expects copper demand to outpace supply for a fourth year in 2013. The U.S. Department of Agriculture is forecasting the smallest global corn stockpiles in six years and the lowest soybean inventories in two decades after drought across the U.S. and Europe parched crops. Sanctions against Iran are crimping oil exports from what was once the second-biggest producer in the Organization of Petroleum Exporting Countries.
“We’re heading for a period of underperformance in commodities after years of outperformance,” Misra said. “The effects of a slowdown in China and resumption of normal production trends in agriculture after this year’s drought- driven supply shocks should continue to pressure commodity prices downward.”
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