MacroVoices #432 Jeff Currie: Metals, Energy, Commodity Super Cycle & More
Jeff Currie, Goldman Sachs' former Global Commodity Strategy Chief, discusses his move to Carlyle and argues that a commodity super cycle is underway driven by capex investment in AI data centers, decarbonization, and deglobalization. He remains bullish on gold ($2,700-$3,000 target), copper, and oil despite recent corrections, while noting that central bank demand (particularly from emerging markets) has fundamentally changed commodity market dynamics by replacing traditional dollar recycling with 'gold recycling.'
Summary
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.
About this episode
MacroVoices Erik Townsend & Patrick Ceresna welcome back, Carlyle’s Chief Strategy Officer, Jeff Currie. They’ll discuss commodities from precious metals to energy to softs, including cocoa and coffee and why they’ve seen so much vol recently. https://bit.ly/3z2Y6cb ⚫ Check Out Carlyle Global Investment Group: https://www.carlyle.com/ 🔻Download Big Picture Trading Chartbook: 📈📉: https://bit.ly/3xgyDLJ ✅SPECIAL FREE LIVE Webinar - Tuesday June 18th, 2024 at 11:00am ET: https://bit.ly/3XlUITF ✅Sign up for a FREE 14-day trial at Big Picture Trading: https://bit.ly/46Ul2FD 🔴 Subscribe to Patrick’s Youtube Channel: https://www.youtube.com/@Patrick_Ceresna 🔴 Subscribe to Erik's Substack: https://eriktownsend.substack.com/ 🔴 Check out Energy Transition Crisis on YouTube: https://www.youtube.com/@EnergyTransitionCrisis1 🔴 Check out Nick's YouTube channel: https://www.youtube.com/c/Optionfinity ✅ Join OptionFinity discord: https://discord.gg/Rvnsv6Y 🔴 Subscribe to Nick’s Medium: https://medium.com/@ngalarnyk Please visit our website https://www.macrovoices.com to register your free account to gain access to supporting materials
Key Insights
- Emerging market central banks have fundamentally changed commodity dynamics by replacing traditional dollar recycling with 'gold recycling' - buying physical assets instead of U.S. treasuries
- Chinese central bank gold demand represents a structural shift where they buy more when prices are low and taper purchases as prices rise, similar to their behavior with oil and copper
- The current commodity super cycle is driven by three key capex drivers: AI data centers, decarbonization, and deglobalization (defense spending) - the 'three Ds'
- This decade's investment is estimated to equal one China from the 2000s, with next decade equaling two Chinas in terms of commodity demand impact
- Copper is transitioning from trading like an emerging market equity to behaving like a true commodity, evidenced by its return to backwardation after years of contango
- Oil demand is tracking above trend at 1.3 million barrels per day growth despite being considered a 'bad year' for oil, with demand consistently surprising to the upside post-2019
- Coffee and cocoa price volatility stems from climate change impacts on equatorial tree commodities, which require years to rebuild supply unlike annual crops
- The traditional ESG approach of divesting from carbon assets merely shifts emissions rather than reducing them, as assets move to countries like India, Indonesia, and China
- A more effective decarbonization strategy requires owning emissions to control them, focusing on pathways between brown and green assets rather than pure divestment
- Chinese coal production appears to be rolling over for the first time since 2015, which historically has been necessary for any commodity bull market to occur
- Uranium market buyers remain complacent despite strong fundamentals, potentially delaying price moves as utilities organize an informal buyer strike
- The breakdown of the traditional negative correlation between oil prices and the dollar indicates a fundamental shift in global monetary recycling patterns
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 432 was produced on June 13th, 2024. I'm Eric Townsend. Goldman Sachs former global commodity strategy chief, Jeff Curry, surprised everyone when he left Goldman to join PE firm Carlyle, where he's heading up a new group focused on energy transition and a new approach to investing. In energy transition, which corrects some of the mistakes of the ESG…
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