MacroVoices #432 Jeff Currie: Metals, Energy, Commodity Super Cycle & More

Episode Summary

Executive Summary: Macro Voices episode 432 centered on Jeff Curry’s bullish view across commodities, especially gold, copper, oil, uranium, and softs, framed by a thesis that deglobalization, central-bank gold buying, and a new CapEx cycle are replacing the old dollar-recycling regime. In post-game, the hosts discussed equity melt-up risk, cheap hedging, and the latest technical levels across major markets.

Main Topics: Gold: central-bank demand and a new regime (Priority: 5/5): Jeff Curry argues gold’s bull market is supported by persistent emerging-market central bank demand, especially from China and Russia, and that one month of paused buying does not invalidate the trend. He sees this as part of a broader shift from dollar recycling to gold recycling. Copper: structural bull case with near-term correction (Priority: 5/5): Copper sold off with the broader commodity complex, but Curry remains bullish due to electrification and decarbonization demand. He emphasizes that copper is increasingly behaving like a commodity again, with backwardation and roll yield becoming more important. Oil and broader energy: bullish late-cycle setup (Priority: 5/5): Curry sees oil heading higher as the cycle matures, positioning is extremely light, and supply additions are limited. He argues current fundamentals and demand growth remain stronger than investor sentiment suggests. Uranium: strong fundamentals, weak urgency (Priority: 4/5): Both Curry and the hosts are constructive long term on uranium, but the market is being delayed by complacent physical buyers who do not yet feel urgency. The hosts warn that the spot market could take longer to move, pressuring miners in the meantime. Softs and climate-driven supply shocks (Priority: 4/5): Coffee and cocoa are portrayed as long-duration supply problems because they are tree crops, meaning climate damage cannot be quickly reversed. This supports ongoing volatility and periodic price spikes. Commodity super cycle as a CapEx cycle (Priority: 5/5): Curry argues the current commodity bull market is best understood as a capital-expenditure cycle driven by AI data centers, decarbonization, and deglobalization/defense spending, analogous to prior super cycles in the 1970s and 2000s. Equity melt-up and portfolio hedging (Priority: 4/5): In the post-game, Patrick and Nick described a still-rising S&P 500 and argued downside hedges remain historically cheap. Patrick emphasized the 'pain trade' and urged investors to consider insurance rather than forced selling.

Key Arguments: Central bank demand, especially from emerging markets, is the dominant marginal driver of gold and helps explain why gold has risen despite higher real rates and a stronger dollar. The current commodity environment differs from prior cycles because dollar recycling into Treasuries has weakened; instead, surplus dollars are being recycled into physical goods and gold. Copper is increasingly a strategic commodity tied to electrification; its recent backwardation suggests investors may earn meaningful roll yield as the market tightens. Oil remains attractive because demand is still growing above trend despite a supposedly weak environment, while spare capacity and new supply are concentrated in a few countries. The market is underestimating how quickly an energy and commodity crunch can reassert itself because investment in new supply has been inadequate for years. Uranium’s long-term bull case is intact, but physical buyers are complacent; the trade may need more time before spot prices force a repricing. Coffee and cocoa are structurally vulnerable because climate damage to tree crops takes years to repair, creating multi-year supply shortages and violent price swings. The current commodity super cycle is fundamentally a CapEx cycle, not merely a demand spike, and is being driven by policy-heavy investment in AI, decarbonization, and deglobalization/defense. For equities, the market is concentrated and extended, so investors with gains may want to hedge rather than rely on a soft-landing narrative. Cheap implied volatility and high interest rates make portfolio hedging unusually attractive relative to history.

Data Points: MacroScore S&P 500 futures: Up 116 bps to 5,492 - Weekly board recap as of June 12, 2024; S&P 500 closed at an all-time high. US Dollar Index: Up 36 bps to 104.68 - Weekly market recap. WTI crude oil: Up 598 bps to 78.50 - Weekly board recap; described as a mean-reverting rally from oversold conditions. RBOB gasoline: Up 170 bps to 239 - Weekly board recap. Gold futures: Down 88 bps to 2,354 - Weekly board recap; later discussed after a sharp Friday selloff. Copper futures: Down 87 bps to 4.56 - Weekly board recap; also described as having struggled to break above 11,000/ton previously. Uranium futures: Down 2.70% to 86.00 - Weekly board recap; intrawweek low noted at 82.90. 10-year U.S. Treasury yield: Up 1 bp to 4.31% - Weekly board recap. U.S. crude inventory change: +3.7 million barrels - EIA inventory data discussed in post-game. Cushing crude inventory change: -1.6 million barrels - EIA inventory data discussed in post-game. Gasoline inventory change: +2.6 million barrels - EIA inventory data discussed in post-game. Distillate inventory change: +881,000 barrels - EIA inventory data discussed in post-game. Net petroleum build: +7.2 million barrels - EIA inventory data discussed in post-game. U.S. production: 13.2 million barrels/day - EIA inventory data; production ticked up 100,000 barrels/day. Oil demand growth: ~1.3 million barrels/day - Curry said U.S. and global oil demand is tracking above trend this year despite a weak environment. Gold central bank demand: Up 60% post-COVID - Curry cited increased gold buying by central banks, especially Russia and China. Gold tactical range: $2,700 to $3,000 - Curry’s one-year bullish price range for gold if fundamentals persist. Copper price level: Above $11,000/ton briefly, then back to low $10,000s - Curry used this to illustrate resistance and the recent selloff. Oil upside target: Above $90, possibly above $100 - Curry said above $90 is realistic; above $100 may be a stretch. SPX implied move into June 21 OPEX: ±60 points from ~5,420 - Nick’s options/levels discussion in post-game. QQQ implied move into June 21 OPEX: ±7 points from 477 - Nick’s options/levels discussion in post-game. SPX support: 5,350 - Nick’s technical levels discussion. Gold support levels: 2,285 on continuation chart; 2,256 on front-month contract chart - Eric’s technical discussion after the gold selloff. Webinar date/time: June 18, 2024 at 11:00 a.m. ET - Patrick announced a free hedging webinar.

Pivotal Quotes: "Gold recycling replacing dollar recycling." — Jeff Curry: Core thesis explaining why central-bank gold demand is changing commodity correlations and weakening the old dollar-recycling model. "You have to own the emissions to control the emissions." — Jeff Curry: His argument that decarbonization requires engagement with brown assets rather than simply divesting them. "The pain trade in investing refers to a market scenario where the majority of investors are positioned in a particular way, but the market moves in the opposite direction." — Patrick Serezna: Post-game discussion on why hedging remains attractive amid complacency and market crowding.

Implications: Listeners should view commodities as entering a policy-driven, CapEx-led super cycle with episodic spikes rather than smooth trends. Near term, gold, copper, oil, and uranium offer opportunities but also sharp volatility; equity investors may want hedges while volatility is cheap.