MacroVoices #399 Ole S Hansen: Still Bullish Commodities
Ole Hansen of Saxo Bank argues the commodity super cycle continues despite recent corrections, driven by tight supply rather than demand. He discusses backwardation's importance for commodity investors and maintains bullish views on energy transition metals despite current weakness.
Summary
This episode features Ole Hansen, Saxo Bank's Commodity Chief, discussing the ongoing commodity super cycle. Hansen argues that while commodity prices have corrected significantly from recent highs, the fundamental bullish thesis remains intact, driven primarily by supply constraints rather than demand factors. He emphasizes how market fragmentation, reshoring/friendshoring of production, green transformation needs, and tight supply across multiple commodities support higher prices. A key focus is on backwardation versus contango in commodity futures markets, which Hansen explains is crucial for investment returns through roll yield. He notes that many commodities are now in backwardation, providing positive roll yields for investors, contrasting with the contango environment that prevailed for much of the past decade. Hansen discusses specific commodities including crude oil, where he sees geopolitical risks but believes spare capacity limits upside potential. He's particularly bullish on industrial metals like copper and aluminum for the energy transition, arguing current prices are too low to incentivize necessary production increases. In precious metals, Hansen explains gold's recent rally as driven more by short covering than safe haven buying, with rising yields paradoxically becoming supportive due to concerns about financial system stress. He maintains a 'patient bullish' outlook for gold, expecting significant upside once peak rates are confirmed. The discussion also covers agricultural commodities affected by weather patterns, with El Nino impacting southern hemisphere production while northern hemisphere crops remain robust.
About this episode
MacroVoice's Erik Townsend & Patrick Ceresna welcome Ole S Hansen as this week’s guest. Ole says the bull market has paused in some commodities, but is set to continue. They also talk about crude oil and the debate over how big the Iran escalation risk is in the Israel conflict. https://bit.ly/46HF07i Ole's Charts: https://bit.ly/3MdGBtm Check out Energy Transition Crisis on YouTube: https://www.youtube.com/@EnergyTransitionCrisis1 Download Big Picture Trading Chartbook 📈📉: https://bit.ly/477pvpg ✅Sign up for a FREE 14-day trial at Big Picture Trading: https://bit.ly/2JjZR7J Please visit our website https://www.macrovoices.com to register your free account to gain access to supporting materials
Key Insights
- Hansen argues the commodity super cycle is driven by tight supply rather than demand, making it more sustainable than demand-driven rallies
- Market fragmentation and reshoring/friendshoring of production is driving up commodity prices as production moves away from cheapest locations
- Many commodities have shifted from contango to backwardation, providing positive roll yields that significantly impact investment returns
- Hansen demonstrates that backwardation can add 10-15% annual returns even with unchanged spot prices in energy commodities
- Current copper prices are argued to be too low to attract the production needed for energy transition goals, despite recent weakness
- Hansen believes gold's recent rally was driven by massive short covering rather than safe haven buying, triggered initially by geopolitical events
- Rising bond yields are becoming gold positive rather than negative because they create concerns about financial system stress
- Hansen maintains spare capacity in oil markets, primarily from Saudi Arabia and UAE, limits upside potential despite geopolitical risks
- Orange juice prices are up over 100% due to disease and storm damage destroying Florida orange tree production
- El Nino weather patterns are creating supply disruptions in southern hemisphere crops while northern hemisphere production remains robust
- Investment flows are moving toward broad commodity exposure ETFs rather than single commodity funds
- Hansen argues that rising inflation expectations, shown in forward inflation swaps hitting 2015 highs, will support commodity prices structurally
Topics
Transcript
This is Macro Voices, the free weekly financial podcast targeting professional finance, high net worth individuals, family offices, and other sophisticated investors. Macro Voices is all about the brightest minds in the world of finance and macroeconomics telling it like it is, bullish or bearish, no holds barred. Now, here are your hosts, Eric Townsend and Patrick Ceresna. Macro Voices episode 399 was produced on October 26th, 2023. I'm Eric Townsend. Saxo Bank Commodities Chief Ola Hansen returns as this week's feature interview guest. Ola says the bull market has paused in some commodities, but it's set to continue. We'll also talk about crude oil and the debate over how big the Iran escalation risk is. And I'm Patrick Ceresna…
Full transcript available for MurmurCast members
Sign Up to AccessMore from Macro Voices
MacroVoices #554 Yasir Arafat: Mass Manufacturing Nuclear Power Plants
Yasser Arafat, CTO of Allo Atomics, discusses the company's plans to mass-produce advanced nuclear reactors at scale, arguing that cost-competitive nuclear energy (cheaper than coal and gas) could be achieved within years, not decades, by leveraging manufacturing principles similar to Tesla's approach. He addresses fuel supply chain constraints, nuclear waste recycling potential, and competitive threats from China while outlining a pathway to transition global energy systems away from fossil fuels.
MacroVoices #553 Brent Johnson: Disparate Housewives
Brent Johnson discusses the dollar's breakout above 102, analyzing why the greenback continues strengthening despite expectations for decline, while also exploring the deepening coordination between the Federal Reserve and Treasury Department in what he calls the "Disparate Housewives" framework. He argues the US remains positioned to weather higher rates better than other economies, and frames the current geopolitical environment as analogous to the early Cold War era with China rather than a replay of the 1970s.
MacroVoices #552 David Rosenberg: Navigating The Noise
David Rosenberg argues that inflation concerns are overblown despite recent energy price spikes, contending that without wage pressures entering the labor market, price shocks will remain transitory. He identifies the November 3rd midterm elections and November 4th Treasury refunding announcement as pivotal catalysts that could trigger significant bond market rallies and economic slowdown as fiscal stimulus ends and gridlock returns.
MacroVoices #551 Michael Every: Decoding The Global Geopolitical Puzzle (Part 2)
Michael Every from Rabobank discusses the interconnected geopolitical tensions between the U.S. and China, analyzing how conflicts in Ukraine, the Middle East, and potential Taiwan invasion scenarios serve as strategic moves in a broader great power competition. He examines emerging policy shifts including potential diesel export bans, AI arms races, and nuclear escalation risks while arguing that national security concerns are overriding traditional free market economics.
MacroVoices #551 Michael Every: Decoding The Global Geopolitical Puzzle
Michael Every of Rabobank discusses interconnected geopolitical crises spanning Iran, Ukraine, and the Middle East, arguing that oil prices don't reflect true disruption risks and that energy will increasingly become a tool of statecraft. The conversation covers potential diesel shortages, U.S. policy responses, the Greenland-Denmark security deal, and China's strategic positioning amid global instability.