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.”
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; Steve Grasso Stuart Frankel & Co and it’s partners own CUBA Stuart Frankel & Co and it’s partners own GERN Stuart Frankel & Co and it’s partners own HPQ Stuart Frankel & Co and it’s partners own HSP Stuart Frankel & Co and it’s partners own HSPO Stuart Frankel & Co and it’s partners own MET Stuart Frankel & Co and it’s partners own MSFT Stuart Frankel & Co and it’s partners own MU Stuart Frankel & Co and it’s partners own NYX Stuart Frankel & Co and it’s partners own PRST Stuart Frankel & Co and it’s partners own UAL Stuart Frankel & Co and it’s partners own XRX Francisco Blanch Mark McKechnie Andy Busch David Ross FedEx Corporation is on the Stifel Analyst Select List. This Select List includes companies that Stifel Nicolaus analysts believe have the potential for the greatest total return in each of their respective areas of coverage over approximately the next 12 months. In some cases, analysts who cover more than one sub-sector may have more than one name on the list. Stifel, Nicolaus & Company, Inc. makes a market in the securities of FedEx Corporation. Stifel, Nicolaus & Company, Inc. expects to receive or intends to seek compensation for investment banking services from FedEx Corporation in the next 3 months. David Wong 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. Wells Fargo Securities, LLC or its affiliates intends to seek or expects to receive compensation for investment banking services in the next three months from 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. Wells Fargo Securities, LLC and/or its affiliates, have beneficial ownership of 1% or more of any class of the common stock of Analog Devices, Inc., QUALCOMM Inc. 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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United Parcel Service, Inc. is on the Stifel Nicolaus Income Opportunity Ideas List. This Income Opportunity Ideas List represents our Stifel Nicolaus analysts’ best yield ideas, however is not intended to represent a model portfolio. Each stock is on the Buy List, and offers what Stifel Nicolaus analysts believe are companies with solid fundamentals, a favorable valuation, and a current dividend higher than that of the S&P 500 Index. Stifel, Nicolaus & Company, Inc. makes a market in the securities of United Parcel Service, Inc.. Stifel, Nicolaus & Company, Inc. expects to receive or intends to seek compensation for investment banking services from United Parcel Service, Inc. in the next 3 months.
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