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

Jeff Currie, former Goldman Sachs Global Commodity Strategy Chief who recently moved to Carlyle as Chief Strategist of Energy Pathways, provides an extensive analysis of current commodity markets and his career transition. He attributes gold's recent $100 single-day decline to Chinese central bank data showing they paused gold purchases for one month, though he dismisses this as establishing any trend. Currie argues that emerging market central banks are driving gold and Bitcoin's outperformance in 2024 by abandoning traditional dollar recycling (where countries would reinvest dollar earnings into U.S. treasuries) in favor of 'gold recycling' - buying physical assets instead. This shift stems from either fears about dollar-based asset freezes (as seen with Russia) or simply that 4.5% treasury yields are insufficient relative to inflation expectations.

On copper, Currie acknowledges recent weakness but maintains his bullish stance, noting the metal has moved into backwardation and arguing it's becoming 'the new oil' due to its role as a superconductor essential for decarbonization. He sees copper trading more like a commodity rather than an emerging market equity proxy as it had post-2008. For oil, despite recent weakness to the low 70s, he's bullish toward $90+ based on late-cycle dynamics, low speculative positioning, above-trend demand growth, and limited spare capacity outside of Saudi Arabia and the U.S.

Currie strongly advocates for a commodity super cycle thesis, defining it as sequences of price spikes driven by capex cycles. He identifies three key drivers: AI data centers, decarbonization, and deglobalization (defense spending) - calling them the 'three Ds.' He estimates this decade's investment will equal one China from the 2000s, with next decade equaling two Chinas. On softs like coffee and cocoa, he attributes extreme volatility to climate change impacts on equatorial tree commodities, noting the multi-year timeline needed to rebuild supply.

Regarding his career move, Currie explains he wanted to participate in rather than just analyze the super cycle. At Carlyle, he's launching an 'energy pathways' approach that focuses on both brown and green assets and the transitions between them, arguing that simply divesting from carbon assets doesn't solve emissions problems but merely shifts them. His strategy involves owning emissions to control them, contrasting with traditional ESG approaches that he views as shirking decarbonization responsibility.