Every so often you come across a podcast or report that crystalises your understanding.
That happened to me last week while listening to a short interview from the well-respected commodity analysts, Ole Hansen.
You can find Ole’s podcast via my X (Twitter) feed above.
Ole has become a trusted voice in the commodity world and has a style that I like… He combines fundamental macro outlooks with technical analysis.
Ole’s point is that it’s easier to find winning stocks once you read the market correctly.
This is especially the case for commodities, which are cyclical.
Commodities: understanding the big picture
Taking a top down approach is a great way to put the odds in your favour.
Commodities are a complex beast.
The outlook for a metal depends on dynamic forces involving geopolitics, supply chains, global mining output and demand.
Each factor can have a critical influence on the underlying spot price.
And each commodity is nuanced.
Take copper, the fortunes of any ASX-listed copper stock will depend on what’s happening in Chile, by far the world’s largest supplier.
In recent months, Chile’s state owned company Codelco, has been hit with cost blow-outs and lack of capital.
2023 was also the company’s worst production year in a quarter of a century!
Understanding problems at the supply coal face allow you look ahead at the emerging opportunities closer to home.
Then there’s lithium, the new kid on the block.
Uniquely, it has just one demand driver… the EV battery market.
That makes it exceptionally volatile, as the last two years have shown.
Its long term outlook also depends heavily on government renewable energy policies.
The point is, you can’t simply look at what a company is doing on the ground, you need to have an understanding of the forces driving the underlying commodity.
Now, another key strategy for investing in the commodity market is this…
You can either be a generalist or a specialist
At my paid service, Diggers & Drillers, I offer readers a generalist view of the commodity market.
We try to cover the full spectrum of opportunities on offer.
From energy to future facing metals such as graphite or copper.
To industrial commodities like titanium or zinc.
Given the geopolitical climate we’re in today, there’s certainly a lot to cover!
Commodities sit at the heart of complex issues in today’s economy.
Now, a generalists certainly has its advantages.
We can tip toe our way through the various opportunities… while one commodity falls another could be emerging into a new bull market.
Yet, right now there is one area of the commodities market that deserves special attention… precious metals.
In fact, in the Ole Hanson’s podcast I highlighted above, he spells out clearly why gold and silver could lead the market in 2024.
As you know, rates are set to fall in the US.
Lower US yields will diminish the appeal of US bonds and cash for investors.
That will boost the appeal of gold as an investment class.
It will also weaken the US dollar.
Given gold and silver are priced in USD, a weakening US dollar will make purchases more attractive to foreign buyers.
That has the potential to increase demand and create higher prices.
Enter… Fat Tails resident gold expert
No doubt, you’ve read some of Brian Chu’s insights in Fat Tail Daily.
You probably realise too, that this guy is obsessed with gold and silver!
Brian could probably tell you the specific details of every gold stock on the ASX, even if the company isn’t listed in he’s portfolio.
All from memory!
It’s why I like to sit down with Brian, chew the fat and get his updates on the precious metals market at least once every couple of months.
I always get a lot from those discussions.
And that’s what Brian is offering all Fat Tail readers tonight.
Put in your diary!
Brian’s going in-depth about the opportunities in gold and silver across developers and explorers.
He’ll also be taking a top down look at this important market.
It is certainly worth listening in.
They’ll be a live Q&A session, and it’s happening tonight, 7pm.
To reserve your spot you can do so here.
Enjoy!
Regards,
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James Cooper,
Editor, Mining: Phase One and Diggers and Drillers
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