"Commodity bull market standard-bearer" Goldman Sachs does not change its original intention and firmly maintains a decade-long bullish view

Over the weekend, Jeff Currie, head of global commodities research at Goldman Sachs, discussed some of the key themes that could affect commodity prices in the coming decades, and once again reiterated the view that the commodity market has been bullish for the past year. Not long ago, the bank said it was "extremely bullish" on commodities and believed that a super cycle of up to 10 years could occur.

Currie said that after government and central bank stimulus policies have been focused on high-income earners (quantitative easing) over the past decade, policy has now begun to shift to support low-income earners (through direct payments, vacation benefits, increases in the minimum wage, low unemployment, etc.), so he believes that because the stimulus package supports a wider population, this will create a scale increase in commodity demand and a bull market for commodities, thus driving inflationary pressures.

In Currie's view, after the mortgage crisis of 2008, credit services gradually moved away from the low- and middle-income consumer population, and wages and unemployment rebounded slowly, leading to weak demand in the "old economy", which further led to low returns in the commodities sector and contributed to underinvestment in the industry. But in March 2020, the cycle reversed, demand for old economy commodities surged, the industry fell into capital and labor shortages, wages rose, employment in related sectors of the old economy recovered, and the cycle began to strengthen itself, which laid the foundation for a commodity bull market.

Recalling Currie's bullish view of commodity markets in 2021, the strategist has pointed out that at the beginning of the commodity super-cycle, there used to be a strange phenomenon in capital flows in this area - when oil prices hit $85/b and inflation reached 7%, small capital invested in the sector would collectively leave. In his view, the last commodity super cycle began in 2003, but it was only in 2005 that capital began to enter the industry. Similarly, Currie believes it will take some time for generalists to return to the field.

In addition, Currie also highlighted the current energy shortage problem, saying: "Except for the eastern Rocky Mountains in the United States, there is an energy shortage problem all over the world. ”

Currie notes that the current energy transition is the first attempt in human history to transition from low-waste, low-density fuels (oil and gas) to high-waste, high-density fuels (wind and solar). At the same time, he pointed out that nuclear energy is the least wasted and densest fuel known to mankind, and the continued high energy costs will drive public opinion to turn to nuclear energy, so Currie expects the EU classification to classify nuclear energy as a sustainable energy source, which he believes will drive ESG capital into the industry.

To make tangible progress on energy transitions or climate change, Currie also believes the industry needs to master energy storage (batteries) or carbon capture technologies. Currie noted that over the past decade, the resources invested in the battery space have been quite large, but the resources for carbon capture and storage have been relatively small. Importantly, Currie notes, "if someone comes up with an effective carbon capture technology, every investment in electric vehicles and energy savings will be a huge boost." ”

In addition to this, Currie argues, "copper is a new oil" because its conductive properties are necessary in almost every major aspect of energy conversion.

Finally, Currie concludes, "The world is trying to run two parallel systems: running the old carbon-based economy at the same time, trying to build a new low-carbon economy, and right now we are in a sub-optimal state in between." The world also needs to invest more in both systems, and we may need about $16 trillion in additional capital expenditures over the next decade. ”