MacroVoices #493 Ole Hansen: Commodities Are Heating Up!

Episode Summary

Executive Summary: Macro Voices episode 493 featured Saxo commodities chief Ole Hansen discussing how tariffs, electrification, geopolitics, and supply-chain reindustrialization are reshaping commodity markets. He argued commodities remain a strategic portfolio hedge, with precious metals strong, copper structurally bullish, oil near-term soft but longer-term constructive, grains oversupplied, and rare earths a major geopolitical vulnerability.

Main Topics: Commodities as a hard-asset regime (Priority: 5/5): Ole framed the macro backdrop as one favoring hard assets over financial assets, driven by uncertainty, geopolitics, and reindustrialization. He argued commodities can be quiet for long stretches but then deliver major multi-year rallies. Precious metals leadership and consolidation (Priority: 5/5): Gold, silver, and especially platinum have been the year’s standout performers, though gold is now consolidating after a strong rally. Ole sees the pause as healthy and expects another leg higher if rate-cut expectations or policy shifts reawaken the trade. Copper, tariffs, and infrastructure demand (Priority: 5/5): Copper was highlighted as both a beneficiary of long-term electrification/AI demand and a victim of tariff-driven market distortions. Ole said U.S. tariffs created major dislocations and likely temporary domestic price distortions, but the long-term copper thesis remains bullish. Energy markets: oil backwardation and near-term oversupply (Priority: 4/5): Oil remains supported by structural demand, but current pricing reflects short-term supply overhang and OPEC output increases. Ole noted the backwardation signals underlying tightness, yet he expects the market to struggle near term before potentially firming later. Rare earth elements and strategic dependence on China (Priority: 5/5): Rare earths were presented as a critical national-security bottleneck because China dominates refining and supply chains. Ole emphasized that the issue is not geological scarcity but refining capacity, which is dirty, expensive, and slow to build. Grains, livestock, and contango-driven trades (Priority: 3/5): Grains are weak due to abundant supply and improving crop prospects, while livestock and some softs are more idiosyncratic. Ole and Patrick discussed how contango/backwardation affects speculative positioning and makes short grain trades attractive. Technical market views across major assets (Priority: 4/5): Patrick reviewed charts showing the S&P 500 breaking to new highs, the dollar resuming its downtrend, crude oil weakening, uranium pausing after a strong run, copper trying to stabilize, and Treasury yields breaking lower.

Key Arguments: Commodities should be considered a strategic portfolio allocation because long-cycle supply constraints and geopolitical fragmentation can produce large upside moves after long quiet periods. Precious metals remain strong because they are politically neutral stores of value; gold’s sideways action after a major rally is a consolidation, not necessarily a top. Silver’s upside is constrained by the lack of central-bank demand, but its industrial use and limited above-ground inventories still make it leveraged to the metals bull market. Copper’s long-term bull case is tied to AI, electrification, urbanization, and reindustrialization, but U.S. tariffs distorted prices and may have created a temporary mismatch between domestic and global markets. The U.S. copper tariff episode showed that tariffs on critical metals can backfire by raising domestic costs and harming market functioning before any meaningful supply response can occur. Rare earths are strategically important despite small monetary turnover because they are essential for defense and high-tech manufacturing; China’s refining dominance is the key bottleneck. Oil demand is not collapsing, but near-term supply growth and seasonal effects can cap prices; the backwardated curve suggests the market still values prompt barrels. Grains remain under pressure because strong production and ample inventories reward short positioning, especially when the forward curve is in contango. Uranium remains fundamentally bullish because reactor fuel needs must eventually be met, but the equity space is already crowded and vulnerable to mean reversion if the catalyst disappoints. Treasury yields appear to be breaking lower, which may signal weakening growth expectations and reinforce the market’s interest in hard assets and lower-duration exposure.

Data Points: S&P 500: 6466 - Macro scoreboard: up 191 bps week over week, setting all-time highs. S&P 500 weekly change: +191 basis points - Patrick reported the index rose to new highs. U.S. Dollar Index: 97.79 - Down 41 bps week over week. WTI crude (Sep): 62.65 - Down 264 bps week over week; below key moving averages. RBOB gasoline (Oct): 191 - Down 104 bps week over week. Gold (Dec): 34.08 - Reported as down 73 bps week over week in the macro scoreboard (transcript wording). Copper (Sep): 450 - Up 204 bps week over week. Uranium: 72.50 - Up 49 bps week over week. U.S. 10-year Treasury yield: 4.24% - Up 1 bp week over week in the macro scoreboard. Gold total return YTD: +30% - Ole described gold as one of the year’s strongest performers. Silver total return YTD: +30% - Ole said silver is also up strongly this year. Platinum total return YTD: +50% - Ole called platinum the best-performing commodity this year. Crude oil futures return: about -10% to -11% - Ole contrasted futures price performance with total return, which is less negative because of backwardation. Crude oil total return: about -2% - Ole noted backwardation reduces the effective loss for longs. Copper tariff move: 10%–40% domestic premium impact - Ole said tariffs could make U.S. copper prices substantially higher than international prices. Copper support zone: $4.00–$4.25 - Patrick identified a multi-year low zone as asymmetric support. Copper recovery level: $4.75 - Patrick said a move above the 200-day moving average would help repair the chart. S&P 500 upside measured move: 6,500–6,600 - Patrick said this is a likely near-term upside target area. Gold trading range: $3,250–$3,450 - Ole described gold as consolidating within a roughly $200 range. Gold long-short ratio: 6.2 to 1 - Ole used managed-money positioning to illustrate crowded longs in gold. Feeder cattle long-short ratio: 12 to 1 - Used as an example of an extremely crowded managed-money long trade. Natural gas carry hurdle: 29% higher in one year - Ole said futures must be materially higher a year out to justify investment in contango. Corn carry hurdle: 15% higher in one year - Ole said this is needed before investment becomes worthwhile given the curve. Rare earth supply from China: 70% - Ole highlighted China’s dominance in rare earth supply/refining. Rare earth supply from Malaysia: 13% - Another major source, but geopolitically vulnerable in a China conflict scenario. MP Materials stock move: +300% since late May - Ole cited this as the clearest public-market beneficiary of rare-earth reshoring hopes. OPEC production increase since start of year: 2.5 million barrels per day - Ole said OPEC has agreed to raise output, though actual increases vary by member. Copper demand timeframe: 5–10 years - Ole said meaningful U.S. copper production increases would take at least this long. Uranium equity move: +100%+ over the last 3–4 months - Patrick said uranium equities have already run sharply higher and may need to consolidate.

Pivotal Quotes: "the prompt price can lie because the prompt price is, there's a lot of other factors impacting the prompt price" — Ola Hansen: He explained why the forward curve/backwardation often gives a better read than spot price alone. "This was certainly hitting a market where the potential or the gains you wanted to achieve from raising tariffs were not going to be successful or going to be achieved anytime soon." — Ola Hansen: His criticism of U.S. copper tariffs and the resulting market distortion. "Gold is several things, but first of all, it's having a bit of a break. It's having an extended summer holiday." — Ola Hansen: He characterized gold’s current sideways action as consolidation rather than trend reversal.

Implications: The episode reinforces a bullish long-term case for hard assets, especially metals tied to electrification and strategic supply chains. Near term, oil and grains face pressure, gold is consolidating, and copper/rare earths remain key geopolitical trades.