MacroVoices #442 Ole Hansen: Year of The Metals
Saxo Bank's Ole Hansen discusses the current state of commodity markets, explaining how the Bloomberg Commodity Index has returned to square one after rallies and corrections, with precious metals leading gains while agricultural commodities show divergent performance between soft commodities and grains.
Summary
Ole Hansen, Saxo Bank's chief commodities strategist, provides a comprehensive analysis of commodity markets at the halfway point of 2024. He notes that the Bloomberg Commodity Index tracking 24 major commodity futures is essentially unchanged for the year and past 18 months, despite significant rallies in the first half followed by deflation. Hansen argues that while a commodity supercycle may still be in play, it will be driven more by supply constraints than strong demand growth, particularly given China's disappointing performance and shift away from construction-heavy stimulus. He discusses how precious metals, led by gold and silver, have been the standout performers, driven by central bank buying, de-dollarization efforts, and safe-haven demand amid geopolitical tensions and US election uncertainty. Hansen explains the impact of funding costs on commodity investments, noting how declining interest rates could reduce the carry cost and attract fresh investment. Base metals like copper experienced speculative froth early in the year tied to AI infrastructure demand, but have since corrected as short-term fundamentals didn't support elevated prices. The energy sector remains range-bound, with OPEC+ successfully managing oil prices around $80 Brent, though Hansen questions whether spare capacity can be returned to the market given demand concerns, particularly from China where EV adoption is accelerating. Agricultural commodities show stark divergence, with soft commodities like cocoa and coffee hitting record highs due to weather challenges in the Southern Hemisphere, while grains face oversupply from favorable Northern Hemisphere weather.
About this episode
MacroVoices Erik Townsend & Patrick Ceresna welcome back, Ole Hansen. They’ll discuss commodities from precious metals to uranium to energy to agriculture, and get Ole’s outlook on whether the deep correction we’ve seen in the commodity supercycle is over or not. https://bit.ly/3T3rypx ⚫ Follow Ole on X: https://www.x.com/Ole_S_Hansen🔻Download Big Picture Trading Chartbook: 📈📉: https://bit.ly/3XdTJED ✅Sign up for a FREE 14-day trial at Big Picture Trading: https://bit.ly/3WbYmgH 🔴 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 ✅ Visit OptionFinity: www.optionfinity.com ✅ 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
- Hansen argues the Bloomberg Commodity Index is essentially unchanged for the past 18 months despite significant intra-period volatility, returning to square one
- Hansen contends that any future commodity supercycle will be driven more by supply constraints than strong demand growth, unlike previous cycles
- Hansen identifies China as the big negative surprise, noting it won't repeat previous stimulus patterns of throwing money at unused construction projects
- Hansen explains that gold buyers are not interest rate sensitive, as the rally occurred while rates were rising, indicating purchases for other reasons like geopolitical hedging
- Hansen highlights that central banks are buying gold due to concerns about Western asset seizure risks, citing the Russia precedent as a key driver
- Hansen notes that copper experienced speculative froth tied to AI infrastructure demand but corrected when short-term fundamentals couldn't support elevated prices
- Hansen observes that OPEC+ has successfully maintained oil prices around $80 Brent through production cuts, but questions their ability to return barrels to market
- Hansen points to China's oil demand potentially peaking this year due to aggressive EV and hybrid vehicle rollout affecting fuel consumption
- Hansen describes extreme divergence in agricultural markets between soft commodities hitting records due to Southern Hemisphere weather and oversupplied grains from favorable Northern Hemisphere conditions
- Hansen explains that commodities must balance on a daily basis, meaning you cannot buy based on future tightness expectations - the market must be tight now for prices to be supported
- Hansen argues that mining companies are focused on acquiring each other's assets rather than finding new ones due to the 12-year average timeline from discovery to production
- Hansen notes that hedge fund positioning in commodities collapsed during the August volatility spike, leaving markets extremely exposed to recovery if fundamentals improve
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 442 was produced on August 22nd, 2024. I'm Eric Townsend. Saxo Bank's chief commodities strategist, Ola Hansen, returns as this week's feature interview guest. We'll talk commodities from precious metals to uranium, to energy, to agriculture, and get Ola's outlook on whether the deep correction we've seen in the commodity market is a good thing or not. The commodity…
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.