Goldman's Jeff Currie reveals 'the best' hedge against inflation, rate hikes and geopolitical risks

Published Tue, Nov 1 20228:33 PM EDT

Oil and commodities are "the best bet" when it comes to hedging against inflation, rising interest rates and geopolitical risk, according to Goldman Sachs' Jeff Currie. Currie, global head of commodities research at Goldman, said investors could protect themselves from the trio of factors troubling financial markets as oil prices are predicted to rise even further in the near term. "Oil and commodities are the best hedge for the environment that we're in right now," Currie said. "They're the best hedge against inflation, as well as the best hedge against rising interest rates. And they're also the best hedge against geopolitical risk. And it's quite high right now." He added that "commodities are performing as advertised," pointing to the positive returns from the sector this year. The S & P North American Natural Resources ETF, for example, which includes stocks from across the U.S. energy and materials sector, has returned around 25% this year. The S & P 500 , in contrast, has fallen by nearly 20% over the same period. Goldman Sachs expects oil prices to rise to $115 a barrel in the first quarter of next year due to "tight fundamentals" in the market. With Brent crude at $94.42 and WTI at $87.97, Goldman's price target represents a 22-30% upside. Currie said the bank's price target faces additional risks to the upside as the market faces a loss of supply from the U.S. Strategic Petroleum Reserve next year. In October, President Joe Biden extended the SPR 's release through to December with an additional 10 to 15 million barrels of oil. The implementation of the European Union's embargo on Russian oil , expected in early December, will also push oil prices up further, Currie said, speaking to CNBC in Abu Dhabi. U.S. shale production, meanwhile, has been "disappointing," according to Currie, because of a lack of sufficient drilling over the past few years. "You have a relatively tight supply situation going into 2023 that will create significant upside," he added. "I think the key point here is, if you're looking to hedge those risks, oil and commodities are your best bet."