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Analyst Sees Strong Oil Prices, $2,000 Gold Ahead

Thursday, 15 Dec 2011 | 1:46 PM ET

As commodity prices continued to slide Thursday, one analyst says a U-turn could be around the corner — including gold above $2,000 per ounce.

“At some point crude oil is going to become a very good trade as we go into next year,” said Francisco Blanch, head of global commodities and multi-asset strategy at Bank of America Merrill Lynch Global Research. “But remember the economy is decelerating.”

Go for the Gold...or Not?
Where gold and other commodities are headed into the new year, with Francisco Blanch, Bank of America Merrill Lynch head of global commodity research.

Blanch said he expected OPEC to increase supply in early 2012, even as demand falls. That could put Brent crude to $100 a barrel on average, with WTI around $92 or below in the first quarter of 2012, he said.

“It’s a little bit too early to go long oil at this stage,” he added.

“Fast Money” traders largely said Wednesday that commodities were too risky to own.

Blanch also said it was likely that European Central Bank, as well as the Federal Reserve, to turn to quantitative easing of monetary policy — something he said was inevitable even as ECB President Mario Draghi explicitly rejected such a move.

“If that happens, that’s going to be a pretty constructive environment for gold,” Blanch said, linking it to a more stable euro.

Gold has seen a wide sell-off in recent days, losing its cant-lose status.

Earlier in the week, widely followed investor Dennis Gartman sold off his personal gold holdings, saying he expected it to head to $1,500 an ounce.

Meanwhile, trader Steve Cortes said gold could go crash to $1,000.

Blanch took the opposite tack.

“We’ll see $2,000, maybe a little bit higher, but you do need to see the large-scale easing,” he said. “Frankly, it’s hard to see how you avoid it.”

Blanch said quantitative easing could happen as early as the first quarter.

“I think you see easing in 2012 and that’s the reason to look into commodities once we have that initial sell-off over the next three months or so,” he said.

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Trader disclosure: On Dec. 15, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders: Adami owns C; Adami owns GS; Adami owns MSFT; Adami owns INTC; Adami owns AGU; Adami owns NUC; Adami owns BTU; Cortes is long SO; Cortes is long TSN; Cortes is short crude; Cortes is short AAPL; Grasso owns ASTM; Grasso owns AVAV; Grasso owns BA; Grasso owns D; Grasso owns LIT; Grasso owns MHY; Grasso owns PFE; Grasso owns PRST; Grasso owns S; Grasso owns XLU;

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Francisco Blanch
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Andy Busch
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Wells Fargo Securities, LLC maintains a market in the common stock of Advanced Micro Devices Inc., Altera Corp., Analog Devices, Inc., Broadcom Corp., Intel Corp., Linear Technology Corp., Maxim Integrated Products Inc., Micron Technology, Inc., Nvidia Corporation, QUALCOMM Inc., Texas Instruments Inc., Xilinx Inc.

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Intel Corp., Micron Technology, Inc., QUALCOMM Inc., Texas Instruments Inc. currently is, or during the 12-month period preceding the date of distribution of the research report was, a client of Wells Fargo Securities, LLC. Wells Fargo Securities, LLC provided noninvestment banking securities-related services to Intel Corp., Micron Technology, Inc., QUALCOMM Inc., Texas Instruments Inc.

Wells Fargo Securities, LLC received compensation for products or services other than investment banking services from Intel Corp., Micron Technology, Inc., QUALCOMM Inc., Texas Instruments Inc. in the past 12 months.

Wells Fargo Securities, LLC or its affiliates may have a significant financial interest in Advanced Micro Devices Inc., Altera Corp., Analog Devices, Inc., Broadcom Corp., Intel Corp., Linear Technology Corp., Maxim Integrated Products Inc., Micron Technology, Inc., Microsemi Corp., Nvidia Corporation, QUALCOMM Inc., Texas Instruments Inc., Xilinx Inc.

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