The conditions are in place for a commodities "super spike," warns Goldman Sachs' global head of commodities research.
"It's the exact same setup as we had back then," Jeffrey Currie said on Yahoo Finance Live, referring to Goldman's now legendary "super spike" call on oil prices from 2005 (which was spot on).
From the vantage-point of the veteran commodities mind Currie, while the top news story of the day has changed since 2005 the dynamics aren't much different.
"The story we were telling back then is the same one we are telling now: The revenge of the old economy. You had the dot com boom taking all the capital away from the old economy. And then you had the strong demand coming from China. Today, we have FAANG [Meta (formerly Facebook), Apple, Amazon, Netflix, Google] boom instead of the dot com boom doing the same exact dynamic, sucking capital away from the old economy. In terms of demand, instead of being China-driven it's COVID driven with the recent policy stimulus in the system," Currie explained.
To be sure, commodities have been en vogue this year amid red-hot inflation and more recently geopolitical unrest between Russia, Ukraine and the United States.
Oil prices have climbed 27% year-to-date to about $95 a barrel. Prices for oil were a stone's throw from the $100 a barrel mark earlier this week as the situation between Russia and Ukraine escalated.
Russia is the world's third-largest producer of oil.
The inflationary commodities scene has extended to gold prices and aluminum, too.
Gold prices are up 6% year-to-date to nearly $2,000 an ounce. Aluminum prices are up 16% on the year.
"The last 50, 60 years gold has always been a stabilizer in a portfolio. You should have around 5% of your portfolio in some sort of gold package. That really helps you through difficult times," Barrick Gold CEO Mark Bristow said on Yahoo Finance Live.
Goldman's Currie said it's important for investors to have exposure to copper and aluminum. And don't forget oil, too.
"In the end, oil will probably give you better returns, but it will be a rocky road. I like to say, buckle your seat belt and hang on for the ride. It's not going to be a straight line up, it will probably be very volatile," Currie said.
Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.
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