JP Morgan Says it’s Time to Buy Commodities “Immediately”

JP Morgan is out with its first overweight call on commodities since September 2010 (a call which turned out to be highly prescient) – here are some of the key takeaways from this bold contrarian call:

  • Seasonality is very favorable once again for commodities
  • Risk is now skewed toward demand growth surprise and production disappointments
  • Metals (particularly copper and gold) are now at price levels which spur involuntary production cuts
  • Jewelry buying cohort which went on a buying strike above $1700/oz in gold last fall may set support around $1150/oz
  • Strong Chinese demand for copper at $6500 per metric ton
  • Inventory destocking is over and storage bunkers need to be replenished
  • In crude oil markets spare capacity is tight and non-economic supply risks are rising
  • ‘Green’ shift in Chinese policy means moving away from coal to oil & gas (not solar & wind)

Additional Coverage - “Ten Reasons to Get Overweight Commodities….Now”