Jeff Currie Says Commodities Are in a ‘Vol Trap’ and the Supercycle Is Still in its Early Innings
Despite sky-high prices, there still isn’t enough investment to bring these markets into balance.
Numerous commodities around the world have seen their prices explode higher over the last year, yet investment in new production has lagged.
The disconnect between soaring prices and sluggish production is what Goldman Sachs Group In.c’s closely-followed head of commodities research Jeff Currie characterizes as a “volatility trap” in which “higher vol discourages more investment, which then reinforces higher vol.”
On the latest episode of the Odd Lots podcast, Currie argues that this dynamic means we’re just in the early innings of the new commodities supercycle he began forecasting last year. Without government policy to smooth prices and give more certainty about the outlook, investors will be wary of funneling money into new production for potentially years to come.