Gold Could See $3,600 Correction Before New Highs, Institutions Still Underweight: Ole Hansen
Summary
Market Outlook: Ole Hansen discusses the current disconnect in the markets, highlighting a supply squeeze in physical commodities like copper and platinum, while US economic data sends mixed signals.
Commodity Insights: The podcast emphasizes the impact of mine disruptions on copper prices, with significant supply issues at major mines like Freeport's Grassburg and Hudbay's Constia, suggesting a bullish outlook for copper.
Gold Market: Gold is experiencing a technical consolidation around $3,750, with potential corrections down to $3,600 seen as healthy pauses, while institutional investors remain underweight despite positive ETF flows.
Platinum and Silver: Platinum is in a supply deficit, driving prices higher, while silver is benefiting from strong industrial and investment demand, with potential for further gains as it remains undervalued compared to gold.
Geopolitical Factors: China's efforts to position Shanghai as a gold storage hub indicate a shift towards a multipolar monetary system, although the dominance of the London market remains strong.
Energy Market: Crude oil prices reflect a potential global slowdown, but geopolitical tensions, particularly involving Russia, could lead to price increases, while natural gas remains undervalued.
Investment Risks: The podcast highlights the risk of a sudden spike in treasury volatility leading to deleveraging across asset classes, with potential impacts on commodities.
Long-term Commodity Outlook: Hansen suggests we are at the beginning of a new super cycle driven by energy transition and re-industrialization, which will increase demand for commodities like gold, silver, and platinum.
Transcript
[Music] Hey everyone, welcome back. I'm Jeremy Saffron. There's a major disconnect in the markets today and the question for investors is quite simple here. Where's the opportunity? Now, we have a physical commodity market that's signaling a major supply squeeze just this morning. Freeport declared force majour a giant grass copper mine sending prices surging over three and a half%. Now, this comes as platinum, the year's top performance with nearly 70% gain, sees its future market cap and a steep backward action, a clear sign of physical tightness. And at the same time, we also got some US data out of the economy, and it's sending confusing signals. We just saw the strongest new home sales print in three years, but it was fueled by deep discounts from the builder. So, how do you make money in this trade? Where is it? Do you follow the warning signs from the physical market or do you bet on the strength in the domestic economy? Here to help us find the opportunity in this divergence is Ole Hansen, head of commodity strategy at Saxo Bank and a strategist who's been well ahead of the curve of many of today's key market moves. Great to see you, Ole. Thanks for being with us. Thanks very much for having me, Jeremy. Okay, we got lots to get to. We talked about it and and I want to quickly touch base on that US macro picture before we get into commodities while you're here Ole because you know we saw that big 20% surge in home sales but as you kind of claw back the data it was driven by heavy incentives more than double of what was normal. What does the one data point tell you about you know the health of the US consumer and and does it factor into any global commodity outlooks here? Not at this point. I think we uh we obviously getting quite a lot of mixed signals right now out of the economic data. But uh but broadly it looks like we are we're still heading for some kind of a a slowdown. The the impact of the tariffs are only really starting to to play its part now. And uh and I believe that that still will will weigh more more in the market than than than this kind of number today which I believe is is a blip for now. Obviously we are now see starting to see the rate cutting process in the US. The question is really how much they can cut this point where inflation remains rather sticky. So uh so that that will be uh that will be a telling sign for how the the housing market is going to fair. But I think the the consumers in in the US just like anywhere else is is uh pretty strong up right now. The inflation is has eaten into their available income. Um prices seems to be going up even though the inflation data shows that it's it's relatively modest. And that just obviously raised the question how how much the how much the the the that can translate into a fresh building boom even if rates come down. Yeah, it makes you wonder how much you know weight you can really put on one subsidized data point here. Uh let's get to this big story. Freeport Freeport just announced this force majour over at Grassburg. Now, you were quoted from this breaking story this morning in Bloomberg uh saying quote uh talking a little bit about how it shows how little it takes to tighten up the market. Um let's talk about this. How significant is this disruption especially as it comes on top of the simultaneously shut down of Hudb Bay right their Constia mine in Peru? Yeah. And I think you also had to have to add the Codelo run mine in in Chile where where we had a a mine mine collapse. uh uh more than more than a month ago. Uh they're still struggling to get back up and running. So basically we have the two big biggest mining operations in the world uh temporarily shutting shutting production and uh that that is simply not what the market something the market can can uh can uh can take at this point in time. We we have seen obviously a massive flow of coppers going into the US in recent months ahead of the terrorists which then didn't materialize and that means there is a bit of a skewess right now in where where copper is actually stored compared to where it may actually be needed and uh I think that's that's helping to uh to to underline this uh the strength in the market or the tightness in the market and it's it's it's obviously I've I've been watch always been watching highrade copper because it's easy to trade but uh unfortunately right now we we have to focus on the LME copper price in London because that uh during the during this tariff squeeze in in New York which obviously ended up being unfounded the the London price was actually behaving very well and didn't do much in terms of range and what we've seen today is it has broken higher above I'm just looking down on my screen 10,160 was a level where we've been projected four times and as we speak now we're trading above 10,300. So it looks like today we have a technical break to the upside which potentially could signal further strength but obviously some of that depends on this this uh this tightness coming in from these mine disruptions. Yeah. Yeah. And you mentioned it. I mean get into a little bit about how big this disruption is. I mean as you mentioned I think Freeport's the second largest mine for copper. I mean this this is some some large numbers. If it is sustainable if it is sustained then then there will be there will be tightness. Uh no doubt about it. uh because we we've seen a copper market which has has held up uh very well. We have to remember that just going back a few years, the main demand for copper was towards housing. Especially in China, housing there has slowed down. But instead, the alternative or new renewable energies has has really taken over. The electrification which is ongoing or really has been been rolled out very rapidly in China where we we're probably a little bit behind around the world and elsewhere. that that is picking up pace and that's basically picking up the slack that in copper demand that otherwise could have been expected with the with the tariff related worries about growth and so on. So um so I think we we're staring into a future where the copper demand will continue to be be demi be strong and we simply need to see whether the miners can keep up and and supply the copper that's required otherwise obviously they need to find it through scrap. Um but generally I think at current levels we are not high enough really to incentivize uh a strong u strong push towards further further excavation and further mining projects being being uh being started. So uh so I see I see the long-term outlook as being positive for for the for the copper market and on this you know this price action on the 3 and a half% that we're seeing on the jump today. I mean just yesterday we were talking about a a significant visible surplus in LME and comx copper inventories. Um, so is this, you know, price surge a sustainable kind of fundamental repricing based on new long-term supply deficit or do you do you see it as kind of that short-term speculative reaction as you mentioned you know buy first before asking questions? Well, the break now has triggered a technical buy reaction. There's no there's no doubt that hedge funds around the world uh who's following momentum and following technical strategies, they will be buying into this this breakout. So obviously the next couple of days will be quite quite crucial for to see whether this breakout sticks. So so I think quite quite a lot of it is ascribed to to speculative trading from a from a technical perspective. And now in the in the coming days depending on how long the this disruption will last and we'll see whether this is the breakout or whether it's just another attempt to take it higher before before we basically then pause again. So, uh, the next, uh, the next few days will be very important there. Yeah. Okay, let's turn to gold. I mean, obviously, we've been talking about it. It's been hitting record after record, and it's been kind of consolidating here around 3750, but it's just below that level now. Last time I checked, it was just 3730. Uh, do you see this as a healthy pause before the next leg up? What's your outlook here? Corrections in gold in the during the last three years have always been healthy because it has given uh investors a little bit of an opportunity to catch up and just basically just to check the strength of the market because it's is always during corrections you you get a a proper feeling for the strength in the market because when it goes up it's just a lot of uh buying the next high uh momentum buying that that comes in. But when it uh when it starts to to to uh retrace then then uh you you have really to show your show your hand and uh we've seen that now on on many occasions for the past 3 years that any any setback setback has been has been very shallow. But it's also very interesting actually that gold despite of all this uh this surge we've seen it's it's trading extremely technical. We trade in a range uh we broke up uh hit hit a record high back in April. Since then we just settled into a range that narrowed on a day on a weekly basis. we basically created a wedge and if you look at some of the charts I put out on on on X the breakout happened on September 1st and when I looked at the uh that range and I basically targeted uh the uh the move up to uh to to just to just below 3,800 and I think we we uh we stopped at 3,790 yesterday. If that is if that's being added now, if you look for retracement levels, then potentially this move could take us down to down close to the 3600. And we have to remember even though that sounds uh is quite dramatic, it just a reflection of how far this market has traveled that corrections can be relatively deep without really hurting the overall bullish setup. Yeah. Yeah. Year to date, I mean, the strength has been absolutely incredible. And I got to ask you, I mean, you with what you do over there at SAX, you're talking to institutions all the time. I mean, the World Gold Council is showing ETF flows are finally turning positive this year. Are you seeing signs that large institutional players are are still fundamentally underweight gold in their portfolios? I believe they certainly are. Um, and I think the uh I think the ETF flows tells a tells a very big story there. And it's it's interesting to see that when when interest rates started to go up back in 22 to in order to combat inflation, that's when ETF flow started to uh to be reduced. We saw a net selling for a number for a couple of years and actually during that time gold was rising simply because when whenever an asset manager was well selling out of his gold because he couldn't hold it because the funding cost was getting too expensive then the central banks were stepping in picking it up and now it seems like both central banks and and uh asset managers are are buying it at the same time. I would know add a small caution there to the central bank demand because we have to reme remember that that the the the value of the the central bank holdings now are exceeding uh in some cases the the value of the bond portfolio simply because gold has rallied as hard as it has. That basically means that the the potential the need to accumulate more gold at this point given the current value of gold may start to see the demand from central bank slow down a bit. But if interest rates continue to come down, if you continue to worry about about the outlook for the US economy, about the Fed independence, about the debt situation, then uh then bits bits are likely still to come into this market. Yeah. More fuel on the fire as they call it. Um okay. Well, let's talk about the physical market for gold then because we've seen reports of the premium on the Shanghai gold exchange remaining persistency persistently high over London prices. Do you think this is a signal that physical demand in Asia is the true driver of this market and that the west is just playing catch-up? I think if you take investors in in China to together with the people's bank of China, then we obviously have a quite a very quite a strong force in the market at least for the past few years and and it just highlights the the demand for for gold in in China remains very firm especially the the Chinese Chinese men are not are not poor people but they used to put their money into properties into a second or third home. I think that that that idea has kind of uh flattened out a bit and that basically means there is there's money that needs to be invested. A stock market has obviously benefited greatly recently quite strong move there but at the same time there's also money going into into the into the gold market. tiny speculators just like anywhere else in the world tend to be very speculative and that basically means that this this this flow may may eb and flow uh come and go but uh but you're absolutely right the premiums right now are quite elevated indicating there is a a strong demand from Asia underpinning these prices and now that we see perhaps a small correction once again we'll have to to uh to gauge the strength of of that demand yeah interesting point there about you know their second or third homes with the market obviously collapsing in Asia where they're putting some of that capital. Um, I want to turn to a major geopolitical story moving kind of the gold market as well. According to this report by Bloomberg, uh, I think just yesterday, China's central bank is actively courting foreign nations to buy and store their gold reserves in Shanghai, creating kind of an alternative to these vaults in London and New York. Do you see this happening? I mean, is this a signal that we're moving towards a multipolar monetary system where countries can effectively choose a side for storing their most critical assets? Well, we are increasingly seeing uh three major centers or probably even more for for gold storage and uh Shanghai is most certainly one of them and rightfully so because obviously they have been the main major buyer of gold in in recent years and they hold an increased amount meaning that they they they hold some uh some weight in in this market. So um so the question is is still really how do you deal with the the currency? It's not a free floating currency. uh how is that being achieved? How is that being perceived? Obviously, if you have a a large amount of trade with China, you you may just want to stay in Rimbe, but I think that potentially could still be a bit of a a drag. But again, they're looking towards the that they're their their close their friends, especially in Asia. And uh with that in mind, they're obviously trading a lot with each other. So that potentially could mean that it we we could they could circumvent the dollar by by focusing on the remember instead of dollars. Yeah, I wonder I mean realistically though London's dominance is built on that deep unparalleled liquidity of the LBMA system as you know I mean the pool of central banks willing to forego that liquidity and legal you know president to store gold in Hong Kong or Shanghai it seems limited to nations already facing sanctions are you know China's political orbit here I mean is this less of a global threat to the dollar's dominance and more of a niche service for a few select countries I think it's still it's still a niche service um there will be more more would have to happen for for the dollar rail to be uh be be threatened. Obviously, we are seeing uh the tariff war. We are seeing uh the potential reduction in global trade. That means the demand for dollars uh may go down over time and that will obviously lower the lower the demand for dollars in general and the need to store dollars. But uh but we we're not there yet in in by any means. Yeah, we got to talk uh platinums obviously that's one of the reasons we are chatting here today. But before we do that, let's talk silver because before coming to air here, Ole, you and I were chatting and you said silver and platinum. I mean, some pretty darn good upside here. We've seen silver take a little correction today, just below $44. What's your outlook? What's your What's your thought on the market? Well, if if you were bullish on gold, you have to talk about $50 in in silver, the the record high from 2011. uh we've had a we've had a phenomenal run up in in silver and for a change we actually did break some key levels without um going back down testing them and actually break below key levels which is that and that has been a story for for silver for for quite some time that whenever it had a breakout it it never really gave the the buyer any piece of peace of mind because we we saw corrections that quite often took it back below these breakout levels something that we haven't seen in gold and that's why gold is I mean nothing is easy in this world But gold from that perspective if you are buying breakouts and you you are you're holding on then then gold has has really not not offered any headache for since 22 almost uh silver is providing a lot of headache and uh but just recently in the last few months we the breakout we saw I believe was 35 when we took that out we we didn't even get close uh in terms of getting back down to correct or to test that that that breakout. That was quite a strong signal. So uh so silver is in in a good place right now. We just as usual have to remind ourselves it is gold on steroids. So basically meaning any corrections in gold will be uh will be multiplied in in in silver. But uh looking at the industrial um part of silver demand that that one looks healthy. Uh supply is is tight. We are seeing a global supply deficit for for for a number of years now. That basically means that increased demand from uh investors towards ETFs uh besides the industrial demand will continue to uh to lower the above ground level of of stored silver and that will help to tighten the market and help underpin prices and I think we're seeing part of that already unfolding. So, um, so I'm I'm a long-term, uh, bull on on silver. Probably like it even a bit more than than than gold, uh, because it it tends to allow to be allowed to run a bit faster than, uh, than what we we've seen in gold. Yeah. And I mean, even if industrial users attempt to kind of thrift, has the monetary demand for silver now become the dominant driver? I mean, with record inflows into silver ETFs and mints are apparently struggling to kind of meet demand for physical coins. I mean is it possible that the investment narrative for silver is that undervalued gold story you know it can now o under maybe overwhelm any marginal changes in the industrial consumption that that could uh that could potentially happen and uh and it I think it just it just boils down to the fact that silver is cheaper. Uh so buying a silver coin doesn't uh doesn't fleece you too much whereas uh silver at almost $4,000 now not quite but uh that it is a tall order. Um silver is still something that that uh that that appeals to the broader public u and investors who just simply want to be who've heard enough stories about gold and silver going up that they want to get involved. uh one thing trying to to buy a gold coin uh you and another thing is to to get hold of silver and that that helps that's part of the the the tightening story and and uh but the the ETF flows obviously is is the is the big one in terms of uh hoovering uh supply out of the market and and thereby helping helping to tighten it up. Yeah. Speaking of supply, uh let's start with the star performer here, platinum. I mean, its futures curve is in a steep backwardation, and we now have data showing a 660% year-over-year surge in physical bar and coin investment. Is the is the price action we're seeing primarily a story of a fundamental physical squeeze. Platinum is is found itself in a an incredible incredible sweet spot back in May. Um, if we look at the chart, we basically been in a downtrend for now, I can't even remember whether it was 11 or 15 years, but it was it's a long time. Uh, we were just in a downtrend since we we we we hit those peaks. I believe it was back in 2011. And and then we actually almost had a decade. Even though we were in a downtrend, it was it was a downtrending range area where we basically more more or less didn't do anything for for a decade. uh simply because the focus was primarily on the the the automobile industry and and the the demand deriving from that. Uh jewelry demand was uh was not really something that that that came but but went again and then suddenly we came to the point where with gold continuing to rally investors or traders around and jewelers around the world well hang on this is this is just getting a little bit ridiculous. Anything else we can substitute and and look at instead and then obviously platinum was just a screaming buy at that point. We had a very um bullish um London Platinum week back in I believe it was late April or or May and uh that basically set the tone because once again we were reminded that this market is is in a supply deficit for the fourth year running. Uh demand is supply is not easy to to increase. It's primarily out of South Africa and if we are seeing increased demand uh not only from the industrial side which is part of the the high-tech the the high-tech future but also from dur then then obviously we we have a perfect storm and basically within the next two months platinum rallied 50%. Again using retracement levels technical analysis I was looking for well I wasn't but um the the the uh it basically corrected one the 382 which is the uh the one weak Fibonacci retracement of that whole rally that's exactly where we found support and this this earlier this week we broke higher to made a new high the highest level I believe since again since 2011 and uh that basically means that it's once again on the run but it needs gold at this point in time I think for to make further further progress. So if we are seeing a correction in gold, then platinum probably will take a pause as well. But but but its relative cheapness is is a is is a strong argument for for platinum combined with the physical tightness that we're seeing. Okay, Ole, let's talk about the gold platinum spread because for decades, platinum traded at a significant premium to gold and I mean today it's still got a discount of more than 12 $2,200 an ounce. Is this a permanent structural shift or do you see a path for this historic relationship to kind of mean revert? I mean, what would it be the catalyst for platinum to trade at a premium to gold again? First of all, the continued strong demand for tangible assets for metals, whether it's precious or industrial uh in a world where the where the you worry about the level of the dollar um worries about worry about other asset classes, then uh and where tangible assets will will play an increased part of of of investors portfolios. If that turns out to be the case, then uh then investors will look at this relative cheapness uh to gold. And I think perhaps with that in mind, it is it is um probably a little bit too far to say it's a generational trade, but uh when when you have something that moves 50% in in a relatively short period of time, consolidate, and then wants to move higher once again, it does indicate that that that that demand is is still out there. And I think if you combine simply combining uh strong demand with with metals or markets where supply is tight, then obviously you have the recipe for for higher prices and and I think platinum is a is a strong candidate for for that for that trade. Yeah. Interesting. I want to talk to you about the rest of the PGM complex because for years, I mean, the story was palladium's dominance in gasoline autoc catalyst, as you know. I mean, kind of leading to a massive price premium over platinum that peaked about $1,500. That spread is completely collapsed. I mean, do you see a structural substitution trend of cheaper platinum replacing palladium in in gasoline engines as a key driver for platinum demand? That was the that was the initial trigger in in the past few years. Similarly, palladium became too expensive relative to platinum. And um and the substitution is not something that that decided overnight. you you meet her you get to work one day and then you decide today we're going to use palladium instead of platinum vice versa this takes this takes years so once once that trend is is is in motion then uh then it will continue even though for a while now we've been seeing platinum regain its crown versus palladium but I think from from an investment perspective uh palladium is a tough one because it's just simply too small uh the interest there is is relatively small again jewelry wise I don't I haven't heard much about palladium rings Um so so I think the the the investment side of uh the equation is is primarily focusing on on on platinum and I think that's really where the the that's where we're seeing the major catalyst and also towards some of the some of the uh the new the new technologies where again it seems like it's plum or platinum that that is the the one that sort Yeah. See it feels like that EV narrative you know it's kind of out the window now. It feels like it's more on the the hybrid. Yeah. That's an interesting uh point and and I think that's one that's potentially another positive driver because uh probably one of the reason why palladium platinum has been in the doghouse for for a number of years was simply the the rapid roll out of EVs and the the thought that we were combustion engines were going to be heading towards the graveyards and we would be there would be no demand for that in in years to come and we are seeing now that this this the EV rollout is slowing the uh the hybrids are coming back hybrids are tend to be gasoline that tends to be platinum. Uh so generally it seems like the automobile industry uh the demand that perhaps was was forecasted to be be uh slowing in in coming years may may end up being more robust than than previously thought and that obviously add another dimension in terms of demand. Mhm. Okay. Well, let's look at the other side of the complex. I mean crude oil is at $65 a barrel and it seems to be pricing in a significant global slowdown. a view supported by the weak Baltic dry index. But how do you kind of you know if we zoom out Ole we've talked about this obviously we know that it's cyclical but how do you reconcile that signal from the physical economy with the all-time highs in the S&P 500 right now? Oh that's a good question. Um oil market seems to be on it living on its own planet right now. um basically dislocated from the rest of the world. Uh and and it's I think mostly just simply due to fundamental developments inside the oil market. We we we all know that OPEC plus have been adding barrels uh on a regular basis now for the for for for the best part of the the the last year. Um what we also know is that not not all of these barrels have yet have yet reached the market. Some producers are struggling to to meet their new higher targets. Some are holding back because they've been overproducing in the past. So they need to wait and uh and so it really leaves only a a few out of those eight nations that are raising production that has actually been able to do it. And now we're seeing uh the uh the Russia situation and that's probably why we once again trading close to $70 here in Brent. Um still stuck in a in a wide $5 range or actually let's call it a very narrow $5 range. We've been now stuck in that for for quite a while now. But it's trying it's making an attempt to the upside and that is the the the heated uh global geopolitical situation that we have now with with Trump suddenly uh seem to be a bit more friendly towards Ukraine. Um probably realizing that Putin had him had him over the knee back in Alaska and uh he's he's he's kind of responding back to to that. So um so with that in mind, we're seeing in Europe recently we we had drones flying over the Copen airport earlier this week. We're still strong to find out who it was. But but obviously some uh some suspicion that it came from Russia. So, so the the temperature on on that geopolitical front is heating up in Europe and uh I think that's also um and that's potentially mean that that there will be an even bigger effort to to hurt the the enabler of this ro of Russia's war and the enablers are primarily India and China through the purchase of deeply discounted crude from from Russia and if they manage to get more sanctions in place that that not hurt Russia because that they they they they take everything on the chin but if they go after the uh the buyers of the the crude and and fuel products. Then perhaps we potentially we could see a winter where prices instead of trading below 60 could potentially trading into the 70s because it's it's tightening due to uh to what we're seeing in Russia. Yeah, it's been wild. And on the natural gas front too, obviously we're hearing a lot of conversations about, you know, cutting oil, cutting gas from Russia. I mean, you're in Europe and and speaking of which, I mean, on that topic, uh more smoke than fire. Are you hearing anything about this? Not really. Um the gas gas filtration in Russia is primarily now a story between Russia and China. Uh Europe is buying a very limited amount of gas. We are we're getting close to our 90% uh storage tanks being full filled before before time. Uh so um it looks like we are we're heading towards the winter with with ample supplies. Even though obviously once winter kicks in, we need constant supplies then storage otherwise storage level will deplete very quickly. But the LG capacity or the LG export capacity especially from the US uh seems to be revving up and then and it's just it it's just it's just incredible how such an important commodity a fuel like natural gas is still trading as dirt cheap as it is especially in in in the US. Um it's not going to last. Um but the same time it's also it it means it's a very deeply contangoed market meaning that the spot price is is trading much lower than further out and that means it's it's just simply impossible to make money on trying to be long natural gas. Uh so rather look at the producers that who ultimately will benefit from from higher prices. All right, great commodity breakdown. Hey, before I let you go LA, I mean let's talk about risk for a second. The move index which measures bond market volatility has been surprisingly subdued despite the Fed's recent actions. I mean is the biggest un underappreciated maybe risk of a sudden spike in treasury volatility that forces a massive deleveraging across all asset classes including this crowded long position in commodities. That is the short-term risk. Um just like we saw back in April when stock markets collapsed after the beautiful bill was uh tariff bill was announced. Um then we we obviously as you rightfully say we we have to remember these a lot of traders in the market they target volatility and if volatility spikes you have to lower the exposure you hold it doesn't really matter whether it's deeply profitable positions that you really like you just have to cut across the board and then you then you pick up the pieces once it does settle and volatility comes back down again. That is obviously a a risk that we uh we we need to be aware of. But at the same time, the uh the bond market that that's really what potentially could we make me uh awake at night and the reason why I'm not uh I'm not I'm never using any calls about rockets or anything in when I talk about markets. I'll leave that to others. But uh what could really send uh the gold price uh flying much more than what we've seen already is obviously if the market loses confidence in the Federal Reserve and with that also in the bond market uh and where we get a Turkish style situation in the US. I don't see that happen. I'm sure there's still a few sane people left in administration that will make sure that that that never happens. But obviously that is a risk that uh that that an outlier risk which initially potentially could send the volatility sharply higher but over time would be a massive support for again the tangible assets that are that are not impacted by or that are away from the the fixed income market and from the dollar. Yeah. Interesting. Okay. And some would argue that the underappreciated risk is not a market event but maybe a political one a potential deescalization of major geopolitical conflicts. I know we were watching the same broadcast from the UN yesterday. You know, there's this uh more rhetoric happening. Obviously, there's there's uh these drones which are close to you. We're watching all these stories, by the way. But I guess my question is, if we were to see a surprise breakthrough, how much of the geopolitical risk premium that's baked into assets like gold and uh and oil would evaporate overnight? some of the some of it would, but you also have to remember if we if we do get a peaceful solution, then we are looking at the a massive reconstruction. Obviously, it could be Ukraine, but it could also be uh uh you could almost hope that it could be in the Gaza Gaza Strip that basically would require a lot of construction that would that potentially could send prices higher, rekindle inflation. So uh so even though in in in the short term it may be there might be an unwinding of a geopolitical risk premium then the uh the aftermath would be a massive building boom a massive economic boost and and that potentially could could drive inflation higher and I think underpin underpin prices again. So uh so I again I don't think that would be the the game changer that the market the market should be too worried about. Yeah. And all this while we're using more AI and uh and energy too. I guess it's a perfect storm. something like that. Yeah, absolutely. The the the the the long-term trend for for commodities in general, I think we are I think we are still at the at the cusp of of a super cycle. We had three in the last three decades. I think we are I think we are uh we have started the third one and I think it is called it is the energy transition super cycle simply because of the energy transition. You can call it green transformation if you like that word. But but the energy transition is basically the increased demand for power which requires massive amount of investment. The uh the re-industrialization of the US and other places pulling production home. These are all inflationary. These are all requiring uh increased demand for for commodities in general. So, so uh and on the investment in the energy market, we just saw recently IIA uh made a 180 on their outlook for for peak demand, peak oil and now saying that the hundreds of billions of dollars are being are needed for years to come in order to just to maintain status grow production. That all but that all points to in my book to higher prices. So long-term bullish on commodities, not only gold and silver and platinum. Yeah. And you've been ahead of that curve uh since we've seen the run up to it, too. All right. Thanks for joining us. Ole Hansen of course joining us from Europosaxo Bank. Your insights have been uh pretty invaluable in piecing together this complex global picture. We appreciate your time. Thank you very much. Thanks Ole. Now a lot of conflicting signals for investors to navigate here. What do you think is the most important indicator to watch right now? Is it the physical demand signals from China or the policy moves from the US Treasury and the Federal Reserve? Let us know your thoughts in the comments below. Make sure to subscribe for our leading market analysis. For Kiko News and for all of us here, I'm Jeremy Saffron. We'll see you next time. Heat. Heat. [Music] Heat. Heat. [Music]
Gold Could See $3,600 Correction Before New Highs, Institutions Still Underweight: Ole Hansen
Summary
Transcript
[Music] Hey everyone, welcome back. I'm Jeremy Saffron. There's a major disconnect in the markets today and the question for investors is quite simple here. Where's the opportunity? Now, we have a physical commodity market that's signaling a major supply squeeze just this morning. Freeport declared force majour a giant grass copper mine sending prices surging over three and a half%. Now, this comes as platinum, the year's top performance with nearly 70% gain, sees its future market cap and a steep backward action, a clear sign of physical tightness. And at the same time, we also got some US data out of the economy, and it's sending confusing signals. We just saw the strongest new home sales print in three years, but it was fueled by deep discounts from the builder. So, how do you make money in this trade? Where is it? Do you follow the warning signs from the physical market or do you bet on the strength in the domestic economy? Here to help us find the opportunity in this divergence is Ole Hansen, head of commodity strategy at Saxo Bank and a strategist who's been well ahead of the curve of many of today's key market moves. Great to see you, Ole. Thanks for being with us. Thanks very much for having me, Jeremy. Okay, we got lots to get to. We talked about it and and I want to quickly touch base on that US macro picture before we get into commodities while you're here Ole because you know we saw that big 20% surge in home sales but as you kind of claw back the data it was driven by heavy incentives more than double of what was normal. What does the one data point tell you about you know the health of the US consumer and and does it factor into any global commodity outlooks here? Not at this point. I think we uh we obviously getting quite a lot of mixed signals right now out of the economic data. But uh but broadly it looks like we are we're still heading for some kind of a a slowdown. The the impact of the tariffs are only really starting to to play its part now. And uh and I believe that that still will will weigh more more in the market than than than this kind of number today which I believe is is a blip for now. Obviously we are now see starting to see the rate cutting process in the US. The question is really how much they can cut this point where inflation remains rather sticky. So uh so that that will be uh that will be a telling sign for how the the housing market is going to fair. But I think the the consumers in in the US just like anywhere else is is uh pretty strong up right now. The inflation is has eaten into their available income. Um prices seems to be going up even though the inflation data shows that it's it's relatively modest. And that just obviously raised the question how how much the how much the the the that can translate into a fresh building boom even if rates come down. Yeah, it makes you wonder how much you know weight you can really put on one subsidized data point here. Uh let's get to this big story. Freeport Freeport just announced this force majour over at Grassburg. Now, you were quoted from this breaking story this morning in Bloomberg uh saying quote uh talking a little bit about how it shows how little it takes to tighten up the market. Um let's talk about this. How significant is this disruption especially as it comes on top of the simultaneously shut down of Hudb Bay right their Constia mine in Peru? Yeah. And I think you also had to have to add the Codelo run mine in in Chile where where we had a a mine mine collapse. uh uh more than more than a month ago. Uh they're still struggling to get back up and running. So basically we have the two big biggest mining operations in the world uh temporarily shutting shutting production and uh that that is simply not what the market something the market can can uh can uh can take at this point in time. We we have seen obviously a massive flow of coppers going into the US in recent months ahead of the terrorists which then didn't materialize and that means there is a bit of a skewess right now in where where copper is actually stored compared to where it may actually be needed and uh I think that's that's helping to uh to to underline this uh the strength in the market or the tightness in the market and it's it's it's obviously I've I've been watch always been watching highrade copper because it's easy to trade but uh unfortunately right now we we have to focus on the LME copper price in London because that uh during the during this tariff squeeze in in New York which obviously ended up being unfounded the the London price was actually behaving very well and didn't do much in terms of range and what we've seen today is it has broken higher above I'm just looking down on my screen 10,160 was a level where we've been projected four times and as we speak now we're trading above 10,300. So it looks like today we have a technical break to the upside which potentially could signal further strength but obviously some of that depends on this this uh this tightness coming in from these mine disruptions. Yeah. Yeah. And you mentioned it. I mean get into a little bit about how big this disruption is. I mean as you mentioned I think Freeport's the second largest mine for copper. I mean this this is some some large numbers. If it is sustainable if it is sustained then then there will be there will be tightness. Uh no doubt about it. uh because we we've seen a copper market which has has held up uh very well. We have to remember that just going back a few years, the main demand for copper was towards housing. Especially in China, housing there has slowed down. But instead, the alternative or new renewable energies has has really taken over. The electrification which is ongoing or really has been been rolled out very rapidly in China where we we're probably a little bit behind around the world and elsewhere. that that is picking up pace and that's basically picking up the slack that in copper demand that otherwise could have been expected with the with the tariff related worries about growth and so on. So um so I think we we're staring into a future where the copper demand will continue to be be demi be strong and we simply need to see whether the miners can keep up and and supply the copper that's required otherwise obviously they need to find it through scrap. Um but generally I think at current levels we are not high enough really to incentivize uh a strong u strong push towards further further excavation and further mining projects being being uh being started. So uh so I see I see the long-term outlook as being positive for for the for the copper market and on this you know this price action on the 3 and a half% that we're seeing on the jump today. I mean just yesterday we were talking about a a significant visible surplus in LME and comx copper inventories. Um, so is this, you know, price surge a sustainable kind of fundamental repricing based on new long-term supply deficit or do you do you see it as kind of that short-term speculative reaction as you mentioned you know buy first before asking questions? Well, the break now has triggered a technical buy reaction. There's no there's no doubt that hedge funds around the world uh who's following momentum and following technical strategies, they will be buying into this this breakout. So obviously the next couple of days will be quite quite crucial for to see whether this breakout sticks. So so I think quite quite a lot of it is ascribed to to speculative trading from a from a technical perspective. And now in the in the coming days depending on how long the this disruption will last and we'll see whether this is the breakout or whether it's just another attempt to take it higher before before we basically then pause again. So, uh, the next, uh, the next few days will be very important there. Yeah. Okay, let's turn to gold. I mean, obviously, we've been talking about it. It's been hitting record after record, and it's been kind of consolidating here around 3750, but it's just below that level now. Last time I checked, it was just 3730. Uh, do you see this as a healthy pause before the next leg up? What's your outlook here? Corrections in gold in the during the last three years have always been healthy because it has given uh investors a little bit of an opportunity to catch up and just basically just to check the strength of the market because it's is always during corrections you you get a a proper feeling for the strength in the market because when it goes up it's just a lot of uh buying the next high uh momentum buying that that comes in. But when it uh when it starts to to to uh retrace then then uh you you have really to show your show your hand and uh we've seen that now on on many occasions for the past 3 years that any any setback setback has been has been very shallow. But it's also very interesting actually that gold despite of all this uh this surge we've seen it's it's trading extremely technical. We trade in a range uh we broke up uh hit hit a record high back in April. Since then we just settled into a range that narrowed on a day on a weekly basis. we basically created a wedge and if you look at some of the charts I put out on on on X the breakout happened on September 1st and when I looked at the uh that range and I basically targeted uh the uh the move up to uh to to just to just below 3,800 and I think we we uh we stopped at 3,790 yesterday. If that is if that's being added now, if you look for retracement levels, then potentially this move could take us down to down close to the 3600. And we have to remember even though that sounds uh is quite dramatic, it just a reflection of how far this market has traveled that corrections can be relatively deep without really hurting the overall bullish setup. Yeah. Yeah. Year to date, I mean, the strength has been absolutely incredible. And I got to ask you, I mean, you with what you do over there at SAX, you're talking to institutions all the time. I mean, the World Gold Council is showing ETF flows are finally turning positive this year. Are you seeing signs that large institutional players are are still fundamentally underweight gold in their portfolios? I believe they certainly are. Um, and I think the uh I think the ETF flows tells a tells a very big story there. And it's it's interesting to see that when when interest rates started to go up back in 22 to in order to combat inflation, that's when ETF flow started to uh to be reduced. We saw a net selling for a number for a couple of years and actually during that time gold was rising simply because when whenever an asset manager was well selling out of his gold because he couldn't hold it because the funding cost was getting too expensive then the central banks were stepping in picking it up and now it seems like both central banks and and uh asset managers are are buying it at the same time. I would know add a small caution there to the central bank demand because we have to reme remember that that the the the value of the the central bank holdings now are exceeding uh in some cases the the value of the bond portfolio simply because gold has rallied as hard as it has. That basically means that the the potential the need to accumulate more gold at this point given the current value of gold may start to see the demand from central bank slow down a bit. But if interest rates continue to come down, if you continue to worry about about the outlook for the US economy, about the Fed independence, about the debt situation, then uh then bits bits are likely still to come into this market. Yeah. More fuel on the fire as they call it. Um okay. Well, let's talk about the physical market for gold then because we've seen reports of the premium on the Shanghai gold exchange remaining persistency persistently high over London prices. Do you think this is a signal that physical demand in Asia is the true driver of this market and that the west is just playing catch-up? I think if you take investors in in China to together with the people's bank of China, then we obviously have a quite a very quite a strong force in the market at least for the past few years and and it just highlights the the demand for for gold in in China remains very firm especially the the Chinese Chinese men are not are not poor people but they used to put their money into properties into a second or third home. I think that that that idea has kind of uh flattened out a bit and that basically means there is there's money that needs to be invested. A stock market has obviously benefited greatly recently quite strong move there but at the same time there's also money going into into the into the gold market. tiny speculators just like anywhere else in the world tend to be very speculative and that basically means that this this this flow may may eb and flow uh come and go but uh but you're absolutely right the premiums right now are quite elevated indicating there is a a strong demand from Asia underpinning these prices and now that we see perhaps a small correction once again we'll have to to uh to gauge the strength of of that demand yeah interesting point there about you know their second or third homes with the market obviously collapsing in Asia where they're putting some of that capital. Um, I want to turn to a major geopolitical story moving kind of the gold market as well. According to this report by Bloomberg, uh, I think just yesterday, China's central bank is actively courting foreign nations to buy and store their gold reserves in Shanghai, creating kind of an alternative to these vaults in London and New York. Do you see this happening? I mean, is this a signal that we're moving towards a multipolar monetary system where countries can effectively choose a side for storing their most critical assets? Well, we are increasingly seeing uh three major centers or probably even more for for gold storage and uh Shanghai is most certainly one of them and rightfully so because obviously they have been the main major buyer of gold in in recent years and they hold an increased amount meaning that they they they hold some uh some weight in in this market. So um so the question is is still really how do you deal with the the currency? It's not a free floating currency. uh how is that being achieved? How is that being perceived? Obviously, if you have a a large amount of trade with China, you you may just want to stay in Rimbe, but I think that potentially could still be a bit of a a drag. But again, they're looking towards the that they're their their close their friends, especially in Asia. And uh with that in mind, they're obviously trading a lot with each other. So that potentially could mean that it we we could they could circumvent the dollar by by focusing on the remember instead of dollars. Yeah, I wonder I mean realistically though London's dominance is built on that deep unparalleled liquidity of the LBMA system as you know I mean the pool of central banks willing to forego that liquidity and legal you know president to store gold in Hong Kong or Shanghai it seems limited to nations already facing sanctions are you know China's political orbit here I mean is this less of a global threat to the dollar's dominance and more of a niche service for a few select countries I think it's still it's still a niche service um there will be more more would have to happen for for the dollar rail to be uh be be threatened. Obviously, we are seeing uh the tariff war. We are seeing uh the potential reduction in global trade. That means the demand for dollars uh may go down over time and that will obviously lower the lower the demand for dollars in general and the need to store dollars. But uh but we we're not there yet in in by any means. Yeah, we got to talk uh platinums obviously that's one of the reasons we are chatting here today. But before we do that, let's talk silver because before coming to air here, Ole, you and I were chatting and you said silver and platinum. I mean, some pretty darn good upside here. We've seen silver take a little correction today, just below $44. What's your outlook? What's your What's your thought on the market? Well, if if you were bullish on gold, you have to talk about $50 in in silver, the the record high from 2011. uh we've had a we've had a phenomenal run up in in silver and for a change we actually did break some key levels without um going back down testing them and actually break below key levels which is that and that has been a story for for silver for for quite some time that whenever it had a breakout it it never really gave the the buyer any piece of peace of mind because we we saw corrections that quite often took it back below these breakout levels something that we haven't seen in gold and that's why gold is I mean nothing is easy in this world But gold from that perspective if you are buying breakouts and you you are you're holding on then then gold has has really not not offered any headache for since 22 almost uh silver is providing a lot of headache and uh but just recently in the last few months we the breakout we saw I believe was 35 when we took that out we we didn't even get close uh in terms of getting back down to correct or to test that that that breakout. That was quite a strong signal. So uh so silver is in in a good place right now. We just as usual have to remind ourselves it is gold on steroids. So basically meaning any corrections in gold will be uh will be multiplied in in in silver. But uh looking at the industrial um part of silver demand that that one looks healthy. Uh supply is is tight. We are seeing a global supply deficit for for for a number of years now. That basically means that increased demand from uh investors towards ETFs uh besides the industrial demand will continue to uh to lower the above ground level of of stored silver and that will help to tighten the market and help underpin prices and I think we're seeing part of that already unfolding. So, um, so I'm I'm a long-term, uh, bull on on silver. Probably like it even a bit more than than than gold, uh, because it it tends to allow to be allowed to run a bit faster than, uh, than what we we've seen in gold. Yeah. And I mean, even if industrial users attempt to kind of thrift, has the monetary demand for silver now become the dominant driver? I mean, with record inflows into silver ETFs and mints are apparently struggling to kind of meet demand for physical coins. I mean is it possible that the investment narrative for silver is that undervalued gold story you know it can now o under maybe overwhelm any marginal changes in the industrial consumption that that could uh that could potentially happen and uh and it I think it just it just boils down to the fact that silver is cheaper. Uh so buying a silver coin doesn't uh doesn't fleece you too much whereas uh silver at almost $4,000 now not quite but uh that it is a tall order. Um silver is still something that that uh that that appeals to the broader public u and investors who just simply want to be who've heard enough stories about gold and silver going up that they want to get involved. uh one thing trying to to buy a gold coin uh you and another thing is to to get hold of silver and that that helps that's part of the the the tightening story and and uh but the the ETF flows obviously is is the is the big one in terms of uh hoovering uh supply out of the market and and thereby helping helping to tighten it up. Yeah. Speaking of supply, uh let's start with the star performer here, platinum. I mean, its futures curve is in a steep backwardation, and we now have data showing a 660% year-over-year surge in physical bar and coin investment. Is the is the price action we're seeing primarily a story of a fundamental physical squeeze. Platinum is is found itself in a an incredible incredible sweet spot back in May. Um, if we look at the chart, we basically been in a downtrend for now, I can't even remember whether it was 11 or 15 years, but it was it's a long time. Uh, we were just in a downtrend since we we we we hit those peaks. I believe it was back in 2011. And and then we actually almost had a decade. Even though we were in a downtrend, it was it was a downtrending range area where we basically more more or less didn't do anything for for a decade. uh simply because the focus was primarily on the the the automobile industry and and the the demand deriving from that. Uh jewelry demand was uh was not really something that that that came but but went again and then suddenly we came to the point where with gold continuing to rally investors or traders around and jewelers around the world well hang on this is this is just getting a little bit ridiculous. Anything else we can substitute and and look at instead and then obviously platinum was just a screaming buy at that point. We had a very um bullish um London Platinum week back in I believe it was late April or or May and uh that basically set the tone because once again we were reminded that this market is is in a supply deficit for the fourth year running. Uh demand is supply is not easy to to increase. It's primarily out of South Africa and if we are seeing increased demand uh not only from the industrial side which is part of the the high-tech the the high-tech future but also from dur then then obviously we we have a perfect storm and basically within the next two months platinum rallied 50%. Again using retracement levels technical analysis I was looking for well I wasn't but um the the the uh it basically corrected one the 382 which is the uh the one weak Fibonacci retracement of that whole rally that's exactly where we found support and this this earlier this week we broke higher to made a new high the highest level I believe since again since 2011 and uh that basically means that it's once again on the run but it needs gold at this point in time I think for to make further further progress. So if we are seeing a correction in gold, then platinum probably will take a pause as well. But but but its relative cheapness is is a is is a strong argument for for platinum combined with the physical tightness that we're seeing. Okay, Ole, let's talk about the gold platinum spread because for decades, platinum traded at a significant premium to gold and I mean today it's still got a discount of more than 12 $2,200 an ounce. Is this a permanent structural shift or do you see a path for this historic relationship to kind of mean revert? I mean, what would it be the catalyst for platinum to trade at a premium to gold again? First of all, the continued strong demand for tangible assets for metals, whether it's precious or industrial uh in a world where the where the you worry about the level of the dollar um worries about worry about other asset classes, then uh and where tangible assets will will play an increased part of of of investors portfolios. If that turns out to be the case, then uh then investors will look at this relative cheapness uh to gold. And I think perhaps with that in mind, it is it is um probably a little bit too far to say it's a generational trade, but uh when when you have something that moves 50% in in a relatively short period of time, consolidate, and then wants to move higher once again, it does indicate that that that that demand is is still out there. And I think if you combine simply combining uh strong demand with with metals or markets where supply is tight, then obviously you have the recipe for for higher prices and and I think platinum is a is a strong candidate for for that for that trade. Yeah. Interesting. I want to talk to you about the rest of the PGM complex because for years, I mean, the story was palladium's dominance in gasoline autoc catalyst, as you know. I mean, kind of leading to a massive price premium over platinum that peaked about $1,500. That spread is completely collapsed. I mean, do you see a structural substitution trend of cheaper platinum replacing palladium in in gasoline engines as a key driver for platinum demand? That was the that was the initial trigger in in the past few years. Similarly, palladium became too expensive relative to platinum. And um and the substitution is not something that that decided overnight. you you meet her you get to work one day and then you decide today we're going to use palladium instead of platinum vice versa this takes this takes years so once once that trend is is is in motion then uh then it will continue even though for a while now we've been seeing platinum regain its crown versus palladium but I think from from an investment perspective uh palladium is a tough one because it's just simply too small uh the interest there is is relatively small again jewelry wise I don't I haven't heard much about palladium rings Um so so I think the the the investment side of uh the equation is is primarily focusing on on on platinum and I think that's really where the the that's where we're seeing the major catalyst and also towards some of the some of the uh the new the new technologies where again it seems like it's plum or platinum that that is the the one that sort Yeah. See it feels like that EV narrative you know it's kind of out the window now. It feels like it's more on the the hybrid. Yeah. That's an interesting uh point and and I think that's one that's potentially another positive driver because uh probably one of the reason why palladium platinum has been in the doghouse for for a number of years was simply the the rapid roll out of EVs and the the thought that we were combustion engines were going to be heading towards the graveyards and we would be there would be no demand for that in in years to come and we are seeing now that this this the EV rollout is slowing the uh the hybrids are coming back hybrids are tend to be gasoline that tends to be platinum. Uh so generally it seems like the automobile industry uh the demand that perhaps was was forecasted to be be uh slowing in in coming years may may end up being more robust than than previously thought and that obviously add another dimension in terms of demand. Mhm. Okay. Well, let's look at the other side of the complex. I mean crude oil is at $65 a barrel and it seems to be pricing in a significant global slowdown. a view supported by the weak Baltic dry index. But how do you kind of you know if we zoom out Ole we've talked about this obviously we know that it's cyclical but how do you reconcile that signal from the physical economy with the all-time highs in the S&P 500 right now? Oh that's a good question. Um oil market seems to be on it living on its own planet right now. um basically dislocated from the rest of the world. Uh and and it's I think mostly just simply due to fundamental developments inside the oil market. We we we all know that OPEC plus have been adding barrels uh on a regular basis now for the for for for the best part of the the the last year. Um what we also know is that not not all of these barrels have yet have yet reached the market. Some producers are struggling to to meet their new higher targets. Some are holding back because they've been overproducing in the past. So they need to wait and uh and so it really leaves only a a few out of those eight nations that are raising production that has actually been able to do it. And now we're seeing uh the uh the Russia situation and that's probably why we once again trading close to $70 here in Brent. Um still stuck in a in a wide $5 range or actually let's call it a very narrow $5 range. We've been now stuck in that for for quite a while now. But it's trying it's making an attempt to the upside and that is the the the heated uh global geopolitical situation that we have now with with Trump suddenly uh seem to be a bit more friendly towards Ukraine. Um probably realizing that Putin had him had him over the knee back in Alaska and uh he's he's he's kind of responding back to to that. So um so with that in mind, we're seeing in Europe recently we we had drones flying over the Copen airport earlier this week. We're still strong to find out who it was. But but obviously some uh some suspicion that it came from Russia. So, so the the temperature on on that geopolitical front is heating up in Europe and uh I think that's also um and that's potentially mean that that there will be an even bigger effort to to hurt the the enabler of this ro of Russia's war and the enablers are primarily India and China through the purchase of deeply discounted crude from from Russia and if they manage to get more sanctions in place that that not hurt Russia because that they they they they take everything on the chin but if they go after the uh the buyers of the the crude and and fuel products. Then perhaps we potentially we could see a winter where prices instead of trading below 60 could potentially trading into the 70s because it's it's tightening due to uh to what we're seeing in Russia. Yeah, it's been wild. And on the natural gas front too, obviously we're hearing a lot of conversations about, you know, cutting oil, cutting gas from Russia. I mean, you're in Europe and and speaking of which, I mean, on that topic, uh more smoke than fire. Are you hearing anything about this? Not really. Um the gas gas filtration in Russia is primarily now a story between Russia and China. Uh Europe is buying a very limited amount of gas. We are we're getting close to our 90% uh storage tanks being full filled before before time. Uh so um it looks like we are we're heading towards the winter with with ample supplies. Even though obviously once winter kicks in, we need constant supplies then storage otherwise storage level will deplete very quickly. But the LG capacity or the LG export capacity especially from the US uh seems to be revving up and then and it's just it it's just it's just incredible how such an important commodity a fuel like natural gas is still trading as dirt cheap as it is especially in in in the US. Um it's not going to last. Um but the same time it's also it it means it's a very deeply contangoed market meaning that the spot price is is trading much lower than further out and that means it's it's just simply impossible to make money on trying to be long natural gas. Uh so rather look at the producers that who ultimately will benefit from from higher prices. All right, great commodity breakdown. Hey, before I let you go LA, I mean let's talk about risk for a second. The move index which measures bond market volatility has been surprisingly subdued despite the Fed's recent actions. I mean is the biggest un underappreciated maybe risk of a sudden spike in treasury volatility that forces a massive deleveraging across all asset classes including this crowded long position in commodities. That is the short-term risk. Um just like we saw back in April when stock markets collapsed after the beautiful bill was uh tariff bill was announced. Um then we we obviously as you rightfully say we we have to remember these a lot of traders in the market they target volatility and if volatility spikes you have to lower the exposure you hold it doesn't really matter whether it's deeply profitable positions that you really like you just have to cut across the board and then you then you pick up the pieces once it does settle and volatility comes back down again. That is obviously a a risk that we uh we we need to be aware of. But at the same time, the uh the bond market that that's really what potentially could we make me uh awake at night and the reason why I'm not uh I'm not I'm never using any calls about rockets or anything in when I talk about markets. I'll leave that to others. But uh what could really send uh the gold price uh flying much more than what we've seen already is obviously if the market loses confidence in the Federal Reserve and with that also in the bond market uh and where we get a Turkish style situation in the US. I don't see that happen. I'm sure there's still a few sane people left in administration that will make sure that that that never happens. But obviously that is a risk that uh that that an outlier risk which initially potentially could send the volatility sharply higher but over time would be a massive support for again the tangible assets that are that are not impacted by or that are away from the the fixed income market and from the dollar. Yeah. Interesting. Okay. And some would argue that the underappreciated risk is not a market event but maybe a political one a potential deescalization of major geopolitical conflicts. I know we were watching the same broadcast from the UN yesterday. You know, there's this uh more rhetoric happening. Obviously, there's there's uh these drones which are close to you. We're watching all these stories, by the way. But I guess my question is, if we were to see a surprise breakthrough, how much of the geopolitical risk premium that's baked into assets like gold and uh and oil would evaporate overnight? some of the some of it would, but you also have to remember if we if we do get a peaceful solution, then we are looking at the a massive reconstruction. Obviously, it could be Ukraine, but it could also be uh uh you could almost hope that it could be in the Gaza Gaza Strip that basically would require a lot of construction that would that potentially could send prices higher, rekindle inflation. So uh so even though in in in the short term it may be there might be an unwinding of a geopolitical risk premium then the uh the aftermath would be a massive building boom a massive economic boost and and that potentially could could drive inflation higher and I think underpin underpin prices again. So uh so I again I don't think that would be the the game changer that the market the market should be too worried about. Yeah. And all this while we're using more AI and uh and energy too. I guess it's a perfect storm. something like that. Yeah, absolutely. The the the the the long-term trend for for commodities in general, I think we are I think we are still at the at the cusp of of a super cycle. We had three in the last three decades. I think we are I think we are uh we have started the third one and I think it is called it is the energy transition super cycle simply because of the energy transition. You can call it green transformation if you like that word. But but the energy transition is basically the increased demand for power which requires massive amount of investment. The uh the re-industrialization of the US and other places pulling production home. These are all inflationary. These are all requiring uh increased demand for for commodities in general. So, so uh and on the investment in the energy market, we just saw recently IIA uh made a 180 on their outlook for for peak demand, peak oil and now saying that the hundreds of billions of dollars are being are needed for years to come in order to just to maintain status grow production. That all but that all points to in my book to higher prices. So long-term bullish on commodities, not only gold and silver and platinum. Yeah. And you've been ahead of that curve uh since we've seen the run up to it, too. All right. Thanks for joining us. Ole Hansen of course joining us from Europosaxo Bank. Your insights have been uh pretty invaluable in piecing together this complex global picture. We appreciate your time. Thank you very much. Thanks Ole. Now a lot of conflicting signals for investors to navigate here. What do you think is the most important indicator to watch right now? Is it the physical demand signals from China or the policy moves from the US Treasury and the Federal Reserve? Let us know your thoughts in the comments below. Make sure to subscribe for our leading market analysis. For Kiko News and for all of us here, I'm Jeremy Saffron. We'll see you next time. Heat. Heat. [Music] Heat. Heat. [Music]