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Commodities bulls betting on further easing from major central banks to revive sagging prices may be setting themselves up for disappointment.
According to commodities analyst Dominic Schnider, loosening monetary policy may release more liquidity into financial markets but that’s not going to be the main driver of prices. Global demand continues to be the key driver of the natural resources sector, and as long as appetite from China – the world’s biggest consumer – remains weak, prices will remain soft.
“At the end of the day, what needs to happen with cheap monetary policy, or loose monetary policy, is that demand gets really activated,” Schnider, Head Commodity Research, UBS Wealth Management told CNBC Asia’s “Squawk Box” on Tuesday.
“And if we don’t see demand getting activated at the end, you are not going to see the kind of inflation that you want.”
Some of the liquidity that was added by central banks in recent easing moves has been kept in banks and “not unleashed into the market and into credit activity,” he said, adding that there is no reason to believe that the next measure will be any different.
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