MacroVoices #401 Leigh Goehring: The Role of Monetary Policy in Commodity Investing​

Episode Summary

Executive Summary: Macro Voices episode 401 centers on Lee Gohring’s thesis that commodities are historically cheap versus financial assets, a setup that has preceded major monetary regime shifts and strong commodity bull markets. The discussion links low commodity prices, loose policy, reserve-currency stress, and rising political/populist pressures to a bullish outlook for gold, oil, and commodity equities over the next decade.

Main Topics: Commodity cheapness vs. financial assets (Priority: 5/5): Gohring argues commodities are at unprecedented relative cheapness versus equities, especially using the Dow Jones Industrial Average as the comparison, and that similar setups preceded major regime changes in 1929, 1969, and 1999. Monetary regime change and reserve currency risk (Priority: 5/5): The interview frames low commodity prices as associated with periods when central banks could run loose policy, culminating in regime breaks such as the end of gold backing in 1930/1971 and potential future erosion of U.S. dollar reserve status. Why commodity equities may outperform commodities (Priority: 5/5): Gohring explains that roll yield/contango can erode direct commodity returns over time, while producer equities can benefit from selling forward and capturing carry, making them preferable in long commodity cycles. Gold and oil as leading assets in the next cycle (Priority: 5/5): Both speakers discuss gold and oil as likely leaders in the emerging commodity bull market, with Gohring calling for much higher long-term gold prices and a structural oil supply deficit as shale growth rolls over. Geopolitical de-escalation and near-term market action (Priority: 4/5): In the post-game, Patrick Serezna notes oil and gold sold off hard as war-risk hedges collapsed on signs of U.S./EU pressure for Gaza negotiations, showing how quickly geopolitics can shift positioning. Fixed income update and Harley Bassman products (Priority: 3/5): The segment clarifies the difference between PFIX (a leveraged rates hedge) and the newly trading MTBA ETF (an unlevered mortgage-backed securities strategy designed to beat the 10-year Treasury by ~150 bps annually). Technical market levels across major assets (Priority: 3/5): The hosts review SPX, QQQ, VIX, dollar, gold, Treasury yields, and natural gas technicals, emphasizing short squeeze dynamics, volatility compression, and key support/resistance zones into November OPEX and CPI/PPI.

Key Arguments: Commodity prices are extremely depressed relative to financial assets, a condition seen only in a few prior historical windows that preceded major macro turning points. Periods of depressed commodities allowed loose monetary policy, which in turn fueled financial speculation and eventually forced regime change. Direct commodity ownership is often burdened by contango and roll costs; commodity-related equities can outperform over full cycles because producers can monetize forward pricing. The U.S. dollar’s reserve-currency dominance may weaken if global actors increasingly settle trade in RMB, gold, or another competing system. Political pressures such as debt jubilees, reparations, and redistribution would likely undermine confidence in fiat currency stability and accelerate a monetary regime shift. Gold could rise dramatically if money creation continues to outpace official gold holdings; Gohring cites a long-term target far above current prices. Oil is transitioning from structural surplus to structural deficit as U.S. shale, especially the Permian, matures and global demand remains resilient. A commodity bull market similar to the 1970s could extend into the 2030s, with gold and oil again acting as the flagship trades.

Data Points: Macro Voices episode: 401 - This is the episode number introduced in the opening. Production date: November 9, 2023 - Episode release date announced at the start. S&P 500 December futures change: +336 bps to 4,399 - Patrick’s week-over-week macro scoreboard. U.S. Dollar Index: 105.52, down 117 bps - Weekly macro scoreboard. WTI crude December contract: $77.37, down 382 bps - Weekly macro scoreboard and later post-game discussion. RBOB gasoline December contract: 2.13, down 229 bps - Weekly macro scoreboard. Gold December contract: $1,958, down 146 bps - Weekly macro scoreboard and post-game technical review. Copper: 3.64, down 27 bps - Weekly macro scoreboard. Uranium: 72.85, down 215 bps - Weekly macro scoreboard. U.S. 10-year Treasury yield: 4.50%, down 24 bps - Weekly macro scoreboard; discussed as rejecting the 5% level. Commodity relative-depression periods: Late 1920s, late 1960s, late 1990s, and today - Gohring identifies these as the only comparable periods in 120 years. Oil demand in 2023: 104 million barrels/day - Gohring argues demand is still growing and above 2019 levels. Oil demand vs. 2019: +3.5 million barrels/day - Patrick cites expected 2023 demand exceeding 2019. Gold long-term target: $15,000 by 2035 - Gohring’s explicit long-term gold call. Gold valuation range from balance-sheet approach: $15,000 to $25,000 - Derived from comparing Federal Reserve balance sheet growth and Treasury gold holdings. Brazil gold purchases: +7 tons in Q1 2023; central bank holdings doubled in 2022 - Used as evidence of increased gold accumulation among trade-settlement participants. China gold buying streak: 6 straight months - Gohring cites this as a sign of rising gold accumulation. Historical gold move in 1970s: $35 to $850 - Example of a 24x increase from 1970 to January 1980. Gold equities/commodity equities portfolio performance: +175% from Sep 1929 to 1940 - Gohring’s historical example of a diversified commodity-equity portfolio. Commodity-equity portfolio performance in 1999-2010: +350% - Compared with zero return for the Goldman Sachs Commodity Index. Goldman Sachs Commodity Index return 1999-2010: 0% - Gohring argues contango/roll yield erased returns. PFIX return: over 200% in roughly 18 months - Mentioned in post-game as a leveraged bet on higher rates. MTBA expected yield pickup: ~150 bps above the 10-year Treasury - Harley Bassman’s new MBS strategy description. MTBA starting price: $50 - Newly launched ETF pricing at debut. MTBA monthly dividend estimate: $0.25/month - Expected distribution mentioned in post-game. SPX implied move for Nov. 17 OPEX: ±65 points - Nick Galarnick’s options-market analysis. QQQ implied move for Nov. 17 OPEX: ±8 points - Options-market analysis for Nasdaq-100 ETF. VIX: 14.50 - Post-game volatility discussion. WTI technical support: ~69.9 and below - Patrick cites 200-week moving average support if selling persists.

Pivotal Quotes: "commodities are as cheap as they have ever been" — Lee Gohring: Core thesis on relative valuation versus financial assets. "what you want to do is you want to significantly increase your expensive exposure to commodity and commodity-related equities at a time when commodities are cheap" — Lee Gohring: Recommendation on portfolio positioning during depressed commodity regimes. "I would say that it could very well take a bizarre form, that it falls back on another style of currency that is incredibly old school and incredibly old-fashioned" — Lee Gohring: Discussion of how reserve-currency change might unfold, possibly through gold-based settlement.

Implications: The episode argues investors should treat commodities as a long-duration macro theme, favoring gold, oil, and commodity equities. It also warns that reserve-currency stress, political populism, and trade-settlement innovation could reshape global monetary order.