Jeff Currie Sees Gold Bull Market Broadening Through Commodities

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00:00Jeff, let's just talk about this. I know you're tracking it. Energy constraints.

00:03We were hoping that maybe this is something out in our future. Is it right here in our present?

00:09Oh, it's right here in our presence. You know, it's discussion around data centers. You know,

00:13you take gas, you know, the constraint on there is gas turbines. It's grid. Grid is copper.

00:19We look at what's going on in the oil market this morning. You know, it's restrictions around,

00:24you know, ships, availability of ships, refineries, you know, all of these old economy

00:29assets are really coming back to bite. And when we look at the commodity complex,

00:34that that bull market that started in gold is broadening. You know, not only does it include,

00:39you know, base metals, it also includes agriculture recently with a big move in soybeans and corn.

00:45And even U.S. natural gas has joined the rally. So, you know, I think the one big laggard is crude oil.

00:52We can talk about that later. But I think when we look at the broader, you know, commodity complex

00:58in the equal way to GSEI is up 25 percent this year. So these physical constraints, they're biting.

01:05Jeff, as you know, we went through an energy bust a decade ago. We did the same thing with other

01:09commodities as well. Anything tied to China went through a bust and it brought a lot of discipline

01:14to some of the miners out there, the Rios, the BHP. They shifted from volume to value. Jeff,

01:19as they did that over the last decade or so, what have we built up to? Just how underinvested are we

01:25in the whole commodity complex? Well, when we look at the growth in like copper, you know,

01:30we're within, you know, a year or so of being in peak supply there. You know, we look at across

01:37even like gold. Gold cannot keep up with the demand that's coming out of the central banks.

01:43You know, we look at, you know, crude oil. There's no investment on a horizon beyond of March of next

01:49year for, you know, for for upstream. In fact, the point I'd like to say is, you know, we look at

01:55all of the new major projects in oil. There's zero that are available, you know, beginning next year

02:04in non-OPEC. But I think your point here, that focus on returning value to shareholders,

02:11not overspending, is now creating a deficit in the availability of supply.

02:16Jeff, how are some of these miners and other commodity producers financing future exploration

02:21and future build out so that they can meet the demand, which is increasing? Is it with debt?

02:27Is there sort of a misdirection of people investing in data centers rather than new, say, copper mines?

02:34Absolutely. When we look at the upstream investment, you know, that old point, you know,

02:39cash is king. You typically need cash flow to be able to make these investments,

02:43particularly in the high volatile markets of commodities. And as a result, prices are not

02:50high enough yet to be able to stimulate that investment. We're now seeing copper getting up

02:54that level around $11,000 a ton, where it does start to make sense and you'll see more projects.

03:00But then with copper, the problem is you don't have the pipeline of projects to actually do,

03:05even if we go to $12,000 a ton. But I think all of these markets, you know, face the same constraints.

03:11And your point about where do you want to be in that supply chain? I'm going to go back to where

03:15is the real bottleneck in this whole, you know, AI process? It's really at the gas turbines in the

03:21grid. The grid is copper and, you know, gas turbines are steel. So we have a lot of investment

03:27that needs to take place at that point in the supply chain before you can really begin to grow it.

03:32This takes time. Everything that you just mentioned takes a lot of time.

03:35I just wonder how feasible some of the AI hopes and dreams and valuations are

03:41without the build out of what you're talking about.

03:44Oh, absolutely. A lot of that CapEx spend that we're seeing, you know, these three,

03:48$400 billion CapEx spends, a lot of that's going to go into the copper price and the commodity prices

03:54because you hit that physical supply constraint, you start to spend more. And what happens? The prices

03:59go up. You know, that's why we look at commodities. They're the most undervalued asset on your screen

04:07today. And of all of them, oil is actually the most undervalued. So what will likely happen here

04:13is that we'll see these commodity prices rise as the demand begins to increase. And in base metals,

04:18we're already witnessing it. And in precious metals, we're already witnessing it. So this is going to

04:24be a continuous feature, not only this year. But by the way, you look at a chart of commodities

04:29in copper and you take it all the way back to 2020. You had that spike in Ukraine, but it's just an

04:37upward trend in prices. You know, you go from $5,000 all the way to around $11,000. So I think

04:44this is, you know, that broader super cycle. We're witnessing it in metals and we're going to see

04:48a continuation of it throughout this decade. So Jeff, let's talk about some numbers. As you say,

04:53copper in London is already close to $11,000. Crude's down in the 60s. What are you expecting

04:58to see in the next 12, 18 months? With copper, when we look out two to three years, we put a

05:06target of around $15,000 a ton on it. So we got a lot more upside. By the way, that $15,000 a ton

05:12just comes from historical, what price do you need to create demand destruction? We really don't know

05:17how high it could actually go. And we're not getting that. We're not that far away at $11,000.

05:22So again, and I think with crude oil, the one thing we're seeing right now is refined product

05:29prices have, you know, dislocated to the upside relative to crude. That means you're struggling

05:34against refining capacity. I'm not going to say we're out of refining capacity or anything like

05:38that. And I think what happens is refineries come back online out of maintenance. As we go into the

05:45end of this year, we're going to see some of that upside that is in the product prices be translated

05:50into, you know, the oil price. But I think the key point here is we look at the broader commodity

05:57complex. Pretty much everything but, you know, crude oil is moving. Even natural gas has moved

06:03in the most recent environment. Jeff, how price sensitive is the investment going on right now?

06:08You mentioned copper. Let's say we go from $11,000 and make our way to $15,000. You mentioned

06:11demand destruction. How are you thinking about whether that kicks in or not based on the amount

06:15of money that's behind this story at the moment? Yeah. When we look at the demand destruction,

06:22it's going to be it's a physical thing. It's not a price thing. And so when you think about it,

06:27bringing on a new copper mine is a 10 to 12 year proposition. We're not going to create supply

06:32tomorrow. So what you have to ask is if you can't bring on the new supply, what price level do you need

06:39that they'll substitute into aluminium or some other type of commodity? And that's where we come up

06:45with that $15,000 a ton price level. But we don't really know until you actually get there. What

06:51are the other factors? Where's the dollar at that point in time? Overall economic GDP? It could be,

06:57you know, substantially higher than that. You know, I would argue the risk here are, you know,

07:02significantly to the upside, given the size of the CapEx spend going on on the AI side.

07:08Just quickly here, Jeff, what's the best way to get in on this? The raw materials,

07:12the equities of commodity companies, or the debt related to this build out?

07:17Oh, I, the debt I would put off to the side where I would be focusing on is the raw materials.

07:23When we think about, you know, the absolute lever to the upside, if you, you know, you own the

07:29commodities, but they're much more volatile. The way I like to think about it is the commodities

07:33themselves, you're playing that very front end spot price with the company and the equities that

07:39produce these things. You're playing that longer term, you know, price. The way I like to think

07:43about it is those companies price inflation expectations. Well, when we think about the

07:49commodities themselves, they're pricing that spot, you know, the unanticipated move in the commodity

07:56prices. So what it would argue own a little bit of both own some of the commodity equities. They

08:00give you that long term price while owning the commodity. It'll give you that, you know,

08:04that near term unexpected upward surprise and prices.

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