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Goldman’s top commodity analysts see copper as a cryptocurrency alternative

Workers pouring mold from a crucible at the ABC Smelter in Sydney, New South Wales, Australia, Thursday, July 2, 2020.

David Gray | Bloomberg | Getty Images

London — Cryptocurrency copper — Not gold That’s the case when it comes to hedging against inflation, according to Jeff Curry, Global Head of Commodity Research at Goldman Sachs.

Inflation is rising with the world economy Central banks have historically eased monetary policy and demand has outpaced supply in multiple ways, recovering from the effects of the Covid-19 crisis. Inflation indicators recommended by the US Federal Reserve Board Core consumer spending index Announced on Friday, April was above expectations, up 3.1% year-on-year.

Gold and crypto Considered a hedge against rising prices,When Crypto Bulls defending Bitcoin in some cases As a replacement for modern bullion. Inflation hedging aims to protect investors from the loss of purchasing power of money due to rising prices.

Gold prices have risen nearly $ 200 since early April, hitting a four-month high, supported by rising demand against the backdrop of a weaker US dollar and rising inflation expectations.

On the other hand, virtual currencies are rampaging. BitcoinFor example, it increased by more than 25% in 2021 and has decreased by more than 25% in the last three months.

Curry said at CNBC’s Squawk Box Europe on Tuesday that investors should not consider digital currencies as a gold alternative when considering inflation hedging.

“If you look at the correlation between Bitcoin and copper, or the risk appetite and Bitcoin scale, Bitcoin has 10 years of trading experience and is definitely a risk-on asset,” Curry said. He said Bitcoin and copper act as “risk-on” inflation hedges compared to safe havens, or gold, which is considered “risk-off.”

Copper soared to record highs in mid-May, fell sharply towards the end of the month, but rebounded again last week.

“There is good inflation and bad inflation. Good inflation is when demand pulls it up, it’s a bitcoin hedge, a copper hedge, an oil hedge,” Curry said. ..

“Gold hedges against bad inflation with reduced supply, focusing on a shortage of chips, commodities and other types of raw materials, and you’ll want to use gold as that hedge,” he said. Added.

“Expected” inflation and rate hikes

Goldman Sachs said in a note on Monday that commodities are generally the best inflation hedge for investors seeking protection from a potential recession.

In a memo, Curry’s commodity research team said stock prices are a good hedge of “expected inflation” because they price with expectations of the future for profits and growth. But the central bank is forced to raise rates. They argued that stocks would lose their usefulness as inflation hedges if inflation expectations were imminent enough to suggest that they could be.

“Commodities are spot assets that do not depend on future growth, and do depend on the level of demand relative to today’s supply levels,” the note said.

As a result, it hedges short-term, unexpected inflation that occurs when aggregate demand levels exceed supply later in the business cycle. “

Goldman’s top commodity analysts see copper as a cryptocurrency alternative

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