1 00:00:05,600 --> 00:00:07,880 Speaker 1: Welcome to the Fear and Greed Business Interview. I'm sure 2 00:00:07,920 --> 00:00:12,200 Speaker 1: n Ailmam. Gold's great run is continuing, hitting record highs 3 00:00:12,240 --> 00:00:14,840 Speaker 1: above twenty five hundred US dollars announce over the past 4 00:00:14,920 --> 00:00:17,599 Speaker 1: few days. With so much uncertainty in the market, there's 5 00:00:17,600 --> 00:00:20,439 Speaker 1: clearly an appetite for safe haven assets. But how far 6 00:00:20,480 --> 00:00:23,720 Speaker 1: can it go? The vector is the director of Mining 7 00:00:23,760 --> 00:00:27,600 Speaker 1: and Energy Commodities Research at Commonwealth Bank for VECK. Welcome 8 00:00:27,600 --> 00:00:28,480 Speaker 1: back to Fear and Greed. 9 00:00:28,800 --> 00:00:29,360 Speaker 2: No, thank you. 10 00:00:30,400 --> 00:00:34,480 Speaker 1: Gold can't go any high. I'm surprised it is where 11 00:00:34,479 --> 00:00:37,479 Speaker 1: it is. What's the outlook for gold and why are 12 00:00:37,520 --> 00:00:39,000 Speaker 1: we seeing it at these levels? 13 00:00:39,400 --> 00:00:41,720 Speaker 2: Sure? So, Look, I think the last time we chatted, 14 00:00:42,000 --> 00:00:44,840 Speaker 2: we actually talked about gold getting to twenty five hundred 15 00:00:44,880 --> 00:00:47,479 Speaker 2: dollars an ounce as a level by the end of 16 00:00:47,479 --> 00:00:50,680 Speaker 2: this year. Now we are already there, and it just 17 00:00:50,720 --> 00:00:54,920 Speaker 2: tells you how quickly gold has responded to current market conditions. 18 00:00:55,280 --> 00:00:57,600 Speaker 2: And this is a commodity that if we look at 19 00:00:57,800 --> 00:01:00,880 Speaker 2: if we look at it throughout this year alone, it 20 00:01:00,920 --> 00:01:04,360 Speaker 2: has been on a tear no matter what is happening 21 00:01:04,360 --> 00:01:08,880 Speaker 2: in the macro background. When the US dollar was strengthening, 22 00:01:08,880 --> 00:01:11,640 Speaker 2: which is usually quite negative for gold. Gold found a 23 00:01:11,680 --> 00:01:13,839 Speaker 2: reason to keep rally and that was on the back 24 00:01:13,880 --> 00:01:17,360 Speaker 2: of central bank demand for gold. And now as where 25 00:01:17,440 --> 00:01:19,760 Speaker 2: in this period where rate cuts are being priced into 26 00:01:19,800 --> 00:01:22,640 Speaker 2: the market, because that's what's looking like the case in 27 00:01:22,680 --> 00:01:26,000 Speaker 2: the US, gold has once again gott in favor and 28 00:01:26,040 --> 00:01:29,960 Speaker 2: particularly gotten support as the US dollar has weakened, and 29 00:01:30,000 --> 00:01:33,120 Speaker 2: so this is now the next rally leg for gold. 30 00:01:33,160 --> 00:01:35,800 Speaker 2: And clearly the risk to our entire outlook is that 31 00:01:35,800 --> 00:01:39,080 Speaker 2: that gold is looking like it'll potentially go even higher 32 00:01:39,080 --> 00:01:41,880 Speaker 2: than twenty five hundred dollars NOWS and potentially finish at 33 00:01:41,920 --> 00:01:44,840 Speaker 2: say something closer to twenty six hundred at the end 34 00:01:44,920 --> 00:01:46,319 Speaker 2: of this fed cut cycle. 35 00:01:47,040 --> 00:01:50,120 Speaker 1: It's a particularly fickle market for gold because you've just 36 00:01:50,120 --> 00:01:56,160 Speaker 1: given the example where gold increased as the usd appreciated 37 00:01:56,240 --> 00:02:00,160 Speaker 1: and then increased as a depreciated is it comes to 38 00:02:00,200 --> 00:02:03,400 Speaker 1: the fundamental that it's a safe haven asset. Like I'm 39 00:02:03,440 --> 00:02:05,920 Speaker 1: still trying to get my head around why it's doing 40 00:02:05,920 --> 00:02:06,440 Speaker 1: so well. 41 00:02:07,160 --> 00:02:10,160 Speaker 2: Yeah, look in terms of historically and if I look 42 00:02:10,200 --> 00:02:12,639 Speaker 2: at it very recently, So let's take twenty twenty four 43 00:02:12,680 --> 00:02:14,640 Speaker 2: out of the equation and just look at the last 44 00:02:15,200 --> 00:02:17,560 Speaker 2: like eighteen months, you know, from the end of twenty 45 00:02:17,560 --> 00:02:20,919 Speaker 2: twenty three, it was very clear that the US dollar 46 00:02:21,240 --> 00:02:24,799 Speaker 2: and gold had developed a very close negative relationship, and 47 00:02:25,160 --> 00:02:29,120 Speaker 2: the idea being that when we saw the US dollar increase, 48 00:02:29,760 --> 00:02:33,480 Speaker 2: gold ended up being more expensive for consumers outside of 49 00:02:33,520 --> 00:02:38,320 Speaker 2: the US, and therefore we saw gold prices effectively. Now, 50 00:02:38,600 --> 00:02:41,760 Speaker 2: this market dynamic was very true for gold for a while, 51 00:02:42,280 --> 00:02:44,919 Speaker 2: and then, as we have seen in the past, these 52 00:02:45,000 --> 00:02:48,600 Speaker 2: relationships break down, and they don't just break down slowly, 53 00:02:48,680 --> 00:02:52,200 Speaker 2: they just disintegrate. And this is why gold is such 54 00:02:52,200 --> 00:02:55,360 Speaker 2: as as you said so so well, it is very 55 00:02:55,440 --> 00:02:58,880 Speaker 2: ficulet and what drives it can be very hard to 56 00:02:59,000 --> 00:03:02,120 Speaker 2: determine in the future, and so you're really relying on 57 00:03:02,160 --> 00:03:05,760 Speaker 2: what has worked very recently. And so we definitely got 58 00:03:05,800 --> 00:03:08,799 Speaker 2: a reality check this year given that that gold has 59 00:03:08,880 --> 00:03:12,400 Speaker 2: just found strength in any market condition, and that's really 60 00:03:12,400 --> 00:03:14,720 Speaker 2: what you know for US has been a big tail wind, 61 00:03:14,760 --> 00:03:17,639 Speaker 2: and why it's very hard to stand in front of 62 00:03:17,680 --> 00:03:21,000 Speaker 2: the momentum and say gold will stop here. It's just 63 00:03:21,040 --> 00:03:23,680 Speaker 2: simply a story that these weight cuts and a weaker 64 00:03:23,800 --> 00:03:26,919 Speaker 2: US dollar is really going to be the rallying prey 65 00:03:27,040 --> 00:03:31,920 Speaker 2: for gold incoming months and potentially over the next twelve plus. 66 00:03:32,120 --> 00:03:34,000 Speaker 1: It used to be unusual that gold was going to 67 00:03:34,000 --> 00:03:36,680 Speaker 1: be above two thousand US dollars. Announced No, it's been 68 00:03:36,680 --> 00:03:40,320 Speaker 1: there for months now. Broadly, do you think it can 69 00:03:40,440 --> 00:03:43,480 Speaker 1: stay you're talking about twenty six hundred, but above that 70 00:03:43,520 --> 00:03:45,840 Speaker 1: two thousand dollars level long term or not. 71 00:03:46,640 --> 00:03:49,680 Speaker 2: Look, I think gold should be treated more like a 72 00:03:49,720 --> 00:03:55,840 Speaker 2: currency than a commodity, and so its level is less 73 00:03:55,840 --> 00:03:59,800 Speaker 2: important than the factors that are driving into momentum. So 74 00:04:00,080 --> 00:04:03,400 Speaker 2: when we look at gold, whether it's it's twenty four hundred, 75 00:04:03,520 --> 00:04:06,240 Speaker 2: twenty five hundred, twenty six hundred, where is it now 76 00:04:06,360 --> 00:04:09,120 Speaker 2: and what are the macro conditions coming up that will 77 00:04:09,160 --> 00:04:12,920 Speaker 2: just create either you know, upward momentum or download momentum. 78 00:04:12,960 --> 00:04:15,800 Speaker 2: But generally we've seen that upward momentum build. But I 79 00:04:15,840 --> 00:04:18,360 Speaker 2: wouldn't get caught up so much in it. It's above 80 00:04:18,360 --> 00:04:22,160 Speaker 2: two thousand is sustainable? This is treating more like a currency, 81 00:04:22,600 --> 00:04:24,720 Speaker 2: And what we're seeing in the macro backdrop is that 82 00:04:24,760 --> 00:04:28,159 Speaker 2: it's all supportive right now, so it can be sustained 83 00:04:28,160 --> 00:04:30,920 Speaker 2: above two thousand. I think the question right now is 84 00:04:31,160 --> 00:04:33,920 Speaker 2: how much above two thousand, and particularly, you know, as 85 00:04:33,920 --> 00:04:36,600 Speaker 2: we get north of twenty five hundred, where will that 86 00:04:36,600 --> 00:04:40,200 Speaker 2: momentum stop and giving our outlook for the US dollar 87 00:04:40,279 --> 00:04:43,400 Speaker 2: to continue to weaken, we see tailwinds ahead for. 88 00:04:44,920 --> 00:04:50,640 Speaker 1: Stay with me, Vivic, We'll be back in a minute. 89 00:04:53,640 --> 00:04:56,560 Speaker 1: My guess this morning is Vivica, Director of Mining and 90 00:04:56,680 --> 00:05:01,480 Speaker 1: Energy Commodities Research as Commonwealth Bank moving on to iron 91 00:05:01,600 --> 00:05:05,040 Speaker 1: ore training around ninety seven US dollars a ton. It 92 00:05:05,080 --> 00:05:07,640 Speaker 1: hasn't sort of been at this level. It's been at 93 00:05:07,640 --> 00:05:11,360 Speaker 1: this level but really consistently at this level for about 94 00:05:11,400 --> 00:05:15,120 Speaker 1: four years or so. Jim Chalmers, a treasurer, came out 95 00:05:15,120 --> 00:05:17,360 Speaker 1: and said it would cut the bottom line of the budget. 96 00:05:18,000 --> 00:05:23,720 Speaker 1: Why is iron ore relatively cheap now compared to the 97 00:05:23,800 --> 00:05:27,559 Speaker 1: last four years at less? And what's the outlook for 98 00:05:27,680 --> 00:05:29,599 Speaker 1: that commodity? Sure? 99 00:05:29,680 --> 00:05:32,120 Speaker 2: So, look, if I had to look at what we 100 00:05:32,320 --> 00:05:35,280 Speaker 2: track for spot prices, we're actually closer to ninety dollars 101 00:05:35,320 --> 00:05:38,119 Speaker 2: a time, So right now we're just south of ninety 102 00:05:38,120 --> 00:05:41,120 Speaker 2: two dollars a time. And this compares with earlier this 103 00:05:41,200 --> 00:05:43,760 Speaker 2: year we saw prices peak at about one hundred and 104 00:05:43,800 --> 00:05:46,440 Speaker 2: forty four dollars. So we have seen iron or come 105 00:05:46,480 --> 00:05:49,840 Speaker 2: off quite a bit in this year a lot. So 106 00:05:50,160 --> 00:05:52,479 Speaker 2: this has been really the big driver and While we've 107 00:05:52,480 --> 00:05:55,920 Speaker 2: seen iron ore flirt with going below one hundred dollars 108 00:05:55,960 --> 00:05:59,080 Speaker 2: a time, we have now seen it sustained below that 109 00:05:59,200 --> 00:06:02,440 Speaker 2: level for now a number of trading sessions, and that 110 00:06:02,560 --> 00:06:05,560 Speaker 2: has alerted market attention because you've broken through a key 111 00:06:05,640 --> 00:06:09,080 Speaker 2: barrier point and now everyone is asking how low can 112 00:06:09,160 --> 00:06:11,960 Speaker 2: we go now to get to the bottom of that. 113 00:06:12,360 --> 00:06:14,520 Speaker 2: It really comes down to one has driven it to 114 00:06:14,720 --> 00:06:18,880 Speaker 2: these levels, and it is coming from very weak Chinese 115 00:06:18,880 --> 00:06:22,360 Speaker 2: stealel demand. You know, we've talked previously, but the problems 116 00:06:22,360 --> 00:06:25,440 Speaker 2: with China's property sector aren't going away. You know, there 117 00:06:25,480 --> 00:06:29,520 Speaker 2: was an entire expectation that policymakers and there were announcements 118 00:06:29,800 --> 00:06:32,640 Speaker 2: in May where they were going to intervene and put 119 00:06:32,680 --> 00:06:36,640 Speaker 2: funding towards purchasing access inventory, converting that to affordable housing, 120 00:06:37,040 --> 00:06:41,039 Speaker 2: and markets back then were optimistic that maybe policymakers have 121 00:06:41,080 --> 00:06:44,840 Speaker 2: the right policy now to stabilize a sector that accounts 122 00:06:44,839 --> 00:06:48,240 Speaker 2: for about your thirty percent of China steel demand. But 123 00:06:48,560 --> 00:06:52,000 Speaker 2: what has become quite apparent is they're not funding that 124 00:06:52,120 --> 00:06:55,120 Speaker 2: package as well as what the market needs it to be, 125 00:06:55,560 --> 00:06:58,560 Speaker 2: and that has meant that the optimism has turned now 126 00:06:58,960 --> 00:07:02,120 Speaker 2: to pessimism, and the property sector continues now to be 127 00:07:02,160 --> 00:07:06,159 Speaker 2: a headwind for China steel demand. But what I think 128 00:07:06,320 --> 00:07:10,200 Speaker 2: the market didn't expect is infrastructure, which is about twenty 129 00:07:10,240 --> 00:07:12,800 Speaker 2: five to thirty percent of China steel demand that has 130 00:07:13,000 --> 00:07:15,600 Speaker 2: also turns out, and the fact that we now have 131 00:07:15,800 --> 00:07:20,680 Speaker 2: both infrastructure and property heading downhill, it has pressed on 132 00:07:20,840 --> 00:07:24,840 Speaker 2: i OR significantly. And it is this pressure which is 133 00:07:24,920 --> 00:07:27,760 Speaker 2: really what is galvanizing eye or closer than ninety dollars 134 00:07:27,760 --> 00:07:31,760 Speaker 2: a ton, and have people worry that how we can 135 00:07:31,800 --> 00:07:34,680 Speaker 2: can these two sectors get because the more it does, 136 00:07:35,160 --> 00:07:37,320 Speaker 2: the closer the risk is that we get even below 137 00:07:37,400 --> 00:07:39,960 Speaker 2: ninety dollars a ton. And if we look at idle 138 00:07:40,040 --> 00:07:43,360 Speaker 2: prices since the beginning of twenty nineteen, whenever we have 139 00:07:43,440 --> 00:07:47,400 Speaker 2: a severe downcycle in any of these kind of cyclical moments, 140 00:07:47,840 --> 00:07:51,160 Speaker 2: eighty dollars a ton is where it usually bottoms out 141 00:07:51,200 --> 00:07:54,600 Speaker 2: and then sharply jumps, and so the newer term we're 142 00:07:54,640 --> 00:07:56,960 Speaker 2: thinking ninety dollars a time would be its bottom. But 143 00:07:57,080 --> 00:07:59,320 Speaker 2: clearly the risk is eighty dollars a ton. So we're 144 00:07:59,360 --> 00:08:02,960 Speaker 2: watching this space very very closely, but this is only temporary. 145 00:08:03,560 --> 00:08:06,120 Speaker 2: Our view is that we will return back above one 146 00:08:06,160 --> 00:08:09,440 Speaker 2: hundred dollars a time once it becomes clear that we 147 00:08:09,480 --> 00:08:12,080 Speaker 2: cannot have a Chinese economy that is bleeding it its 148 00:08:12,080 --> 00:08:15,440 Speaker 2: property and infrastructure sectors. They are such important parts of 149 00:08:15,520 --> 00:08:19,400 Speaker 2: China's economy that we need to see them turn a corner, 150 00:08:19,880 --> 00:08:23,280 Speaker 2: and we expect policy makers to provide that support because 151 00:08:23,320 --> 00:08:26,000 Speaker 2: they are not going to get their growth to about 152 00:08:26,320 --> 00:08:29,320 Speaker 2: around five percent this year if we continue to see 153 00:08:29,360 --> 00:08:32,760 Speaker 2: what's happening in infrastruction, property persist for the remainder of 154 00:08:32,840 --> 00:08:33,600 Speaker 2: twenty twenty four. 155 00:08:34,520 --> 00:08:40,360 Speaker 1: Okay, last one, oil we talked about goal being figgle vec. 156 00:08:40,679 --> 00:08:43,719 Speaker 1: Erican oil is even more fickle. If there is such 157 00:08:43,760 --> 00:08:48,480 Speaker 1: a thing for commodities, it's trading under IDUs dollars a barrel. 158 00:08:48,720 --> 00:08:53,400 Speaker 1: Considering the tension in the Middle East, how susceptible are 159 00:08:53,440 --> 00:08:56,559 Speaker 1: we to big moves in oil prices? 160 00:08:57,920 --> 00:09:01,200 Speaker 2: So look, I think oil is one that has been 161 00:09:01,240 --> 00:09:04,800 Speaker 2: generally arrange bound as between seventy five and eighty five 162 00:09:04,880 --> 00:09:08,319 Speaker 2: dollars a barrel, and this has been almost a play 163 00:09:08,400 --> 00:09:12,679 Speaker 2: for the most part between demand concerns, particularly out of China, 164 00:09:12,760 --> 00:09:16,160 Speaker 2: which is pressing on the lower side. So you push 165 00:09:16,200 --> 00:09:18,680 Speaker 2: towards seventy five dollars a barrel, and then you have 166 00:09:18,880 --> 00:09:23,000 Speaker 2: OPEC plus, which controls you know, we're talking forty to 167 00:09:23,000 --> 00:09:27,000 Speaker 2: forty five percent of supply. They're curtailing production in order 168 00:09:27,040 --> 00:09:29,840 Speaker 2: to support prices higher, and that helps you up towards 169 00:09:29,840 --> 00:09:32,520 Speaker 2: that eighty five dollars a ballot. Now, this tension has 170 00:09:32,559 --> 00:09:34,719 Speaker 2: been there for a while, it's the reason why we're 171 00:09:34,760 --> 00:09:38,480 Speaker 2: so range bound. But where all that positive risk and 172 00:09:38,520 --> 00:09:41,120 Speaker 2: where markets have been worried is what happens in the 173 00:09:41,120 --> 00:09:44,600 Speaker 2: Middle East. You know, post this this Israel commassold that 174 00:09:44,679 --> 00:09:48,880 Speaker 2: began in October seven last year, and how that tracks 175 00:09:48,920 --> 00:09:53,560 Speaker 2: and the concerns over that. Oil markets certainly only pay 176 00:09:54,040 --> 00:09:56,760 Speaker 2: like one hundred percent attention at price in a premium 177 00:09:57,080 --> 00:10:00,360 Speaker 2: when they think actual supplies at risk. And you can 178 00:10:00,360 --> 00:10:05,640 Speaker 2: see that because there's coutial, cautious optimism over truce. We've 179 00:10:05,679 --> 00:10:09,240 Speaker 2: seen prices payback to Brent under eighty dollars a barrow. 180 00:10:09,840 --> 00:10:13,480 Speaker 2: But the ability for that situation to really go the 181 00:10:13,520 --> 00:10:18,080 Speaker 2: wrong way is absolutely possible. And if we look at 182 00:10:18,120 --> 00:10:21,400 Speaker 2: what's happening, would say the market right now they're waiting 183 00:10:21,440 --> 00:10:26,840 Speaker 2: for Iran to retaliate against Israel for the death of 184 00:10:26,840 --> 00:10:30,839 Speaker 2: a senior Amas figure in Tehran. So in Iranian soil. Now, 185 00:10:31,240 --> 00:10:33,880 Speaker 2: how that plays out and what that means is where 186 00:10:33,920 --> 00:10:38,000 Speaker 2: all the escalation can take place, because if Israel retaliates 187 00:10:38,000 --> 00:10:42,079 Speaker 2: to that by attacking Iranian oil infrastructure, the market can rally, 188 00:10:42,120 --> 00:10:44,840 Speaker 2: I can rally quite strongly. And earlier this year when 189 00:10:44,880 --> 00:10:48,040 Speaker 2: Around and Israel were fighting, we actually saw Brent rise 190 00:10:48,120 --> 00:10:51,320 Speaker 2: above ninety dollars a barrow. So these risks are there. 191 00:10:51,600 --> 00:10:55,320 Speaker 2: But until we see a key sequence of dots that 192 00:10:55,360 --> 00:10:58,079 Speaker 2: we can connect and be like, yes, that's happening, oil 193 00:10:58,080 --> 00:11:00,560 Speaker 2: markets won't believe it. They want to see it. And 194 00:11:00,640 --> 00:11:03,880 Speaker 2: so the risk with oil in our view is we're 195 00:11:03,920 --> 00:11:06,840 Speaker 2: talking seventy five to eighty five, but we have positive 196 00:11:07,080 --> 00:11:11,880 Speaker 2: risk all related to what happens with the tensions in 197 00:11:11,920 --> 00:11:12,480 Speaker 2: the Middle East. 198 00:11:13,400 --> 00:11:15,120 Speaker 1: VEC thank you for talking to Fear and Greed. 199 00:11:15,679 --> 00:11:16,080 Speaker 2: Thank you. 200 00:11:16,600 --> 00:11:19,920 Speaker 1: That was Vivek Dar, director of Mining and Energy Commodities 201 00:11:19,960 --> 00:11:22,880 Speaker 1: Research at Commonwealth Bank. This is the Fear and Greed, 202 00:11:22,920 --> 00:11:25,120 Speaker 1: a daily interview. Join us every morning for the full 203 00:11:25,160 --> 00:11:27,840 Speaker 1: episode of Fear and Greed, daily business news for people 204 00:11:27,840 --> 00:11:30,640 Speaker 1: who make their own decisions. I'm Sean Elmer. I'm sure 205 00:11:30,640 --> 00:11:31,000 Speaker 1: you today