Welcome to the Fear and Greed Business Interview. I'm sure n Ailmam. Gold's great run is continuing, hitting record highs above twenty five hundred US dollars announce over the past few days. With so much uncertainty in the market, there's clearly an appetite for safe haven assets. But how far can it go? The vector is the director of Mining and Energy Commodities Research at Commonwealth Bank for VECK. Welcome back to Fear and Greed.

Welcome to the Fear and Greed Business Interview. I'm sure n Ailmam. Gold's great run is continuing, hitting record highs above twenty five hundred US dollars announce over the past few days. With so much uncertainty in the market, there's clearly an appetite for safe haven assets. But how far can it go? The vector is the director of Mining and Energy Commodities Research at Commonwealth Bank for VECK. Welcome back to Fear and Greed.

No, thank you.

No, thank you.

Gold can't go any high. I'm surprised it is where it is. What's the outlook for gold and why are we seeing it at these levels?

Gold can't go any high. I'm surprised it is where it is. What's the outlook for gold and why are we seeing it at these levels?

Sure? So, Look, I think the last time we chatted, we actually talked about gold getting to twenty five hundred dollars an ounce as a level by the end of this year. Now we are already there, and it just tells you how quickly gold has responded to current market conditions. And this is a commodity that if we look at if we look at it throughout this year alone, it has been on a tear no matter what is happening in the macro background. When the US dollar was strengthening, which is usually quite negative for gold. Gold found a reason to keep rally and that was on the back of central bank demand for gold. And now as where in this period where rate cuts are being priced into the market, because that's what's looking like the case in the US, gold has once again gott in favor and particularly gotten support as the US dollar has weakened, and so this is now the next rally leg for gold. And clearly the risk to our entire outlook is that that gold is looking like it'll potentially go even higher than twenty five hundred dollars NOWS and potentially finish at say something closer to twenty six hundred at the end of this fed cut cycle.

Sure? So, Look, I think the last time we chatted, we actually talked about gold getting to twenty five hundred dollars an ounce as a level by the end of this year. Now we are already there, and it just tells you how quickly gold has responded to current market conditions. And this is a commodity that if we look at if we look at it throughout this year alone, it has been on a tear no matter what is happening in the macro background. When the US dollar was strengthening, which is usually quite negative for gold. Gold found a reason to keep rally and that was on the back of central bank demand for gold. And now as where in this period where rate cuts are being priced into the market, because that's what's looking like the case in the US, gold has once again gott in favor and particularly gotten support as the US dollar has weakened, and so this is now the next rally leg for gold. And clearly the risk to our entire outlook is that that gold is looking like it'll potentially go even higher than twenty five hundred dollars NOWS and potentially finish at say something closer to twenty six hundred at the end of this fed cut cycle.

It's a particularly fickle market for gold because you've just given the example where gold increased as the usd appreciated and then increased as a depreciated is it comes to the fundamental that it's a safe haven asset. Like I'm still trying to get my head around why it's doing so well.

It's a particularly fickle market for gold because you've just given the example where gold increased as the usd appreciated and then increased as a depreciated is it comes to the fundamental that it's a safe haven asset. Like I'm still trying to get my head around why it's doing so well.

Yeah, look in terms of historically and if I look at it very recently, So let's take twenty twenty four out of the equation and just look at the last like eighteen months, you know, from the end of twenty twenty three, it was very clear that the US dollar and gold had developed a very close negative relationship, and the idea being that when we saw the US dollar increase, gold ended up being more expensive for consumers outside of the US, and therefore we saw gold prices effectively. Now, this market dynamic was very true for gold for a while, and then, as we have seen in the past, these relationships break down, and they don't just break down slowly, they just disintegrate. And this is why gold is such as as you said so so well, it is very ficulet and what drives it can be very hard to determine in the future, and so you're really relying on what has worked very recently. And so we definitely got a reality check this year given that that gold has just found strength in any market condition, and that's really what you know for US has been a big tail wind, and why it's very hard to stand in front of the momentum and say gold will stop here. It's just simply a story that these weight cuts and a weaker US dollar is really going to be the rallying prey for gold incoming months and potentially over the next twelve plus.

Yeah, look in terms of historically and if I look at it very recently, So let's take twenty twenty four out of the equation and just look at the last like eighteen months, you know, from the end of twenty twenty three, it was very clear that the US dollar and gold had developed a very close negative relationship, and the idea being that when we saw the US dollar increase, gold ended up being more expensive for consumers outside of the US, and therefore we saw gold prices effectively. Now, this market dynamic was very true for gold for a while, and then, as we have seen in the past, these relationships break down, and they don't just break down slowly, they just disintegrate. And this is why gold is such as as you said so so well, it is very ficulet and what drives it can be very hard to determine in the future, and so you're really relying on what has worked very recently. And so we definitely got a reality check this year given that that gold has just found strength in any market condition, and that's really what you know for US has been a big tail wind, and why it's very hard to stand in front of the momentum and say gold will stop here. It's just simply a story that these weight cuts and a weaker US dollar is really going to be the rallying prey for gold incoming months and potentially over the next twelve plus.

It used to be unusual that gold was going to be above two thousand US dollars. Announced No, it's been there for months now. Broadly, do you think it can stay you're talking about twenty six hundred, but above that two thousand dollars level long term or not.

It used to be unusual that gold was going to be above two thousand US dollars. Announced No, it's been there for months now. Broadly, do you think it can stay you're talking about twenty six hundred, but above that two thousand dollars level long term or not.

Look, I think gold should be treated more like a currency than a commodity, and so its level is less important than the factors that are driving into momentum. So when we look at gold, whether it's it's twenty four hundred, twenty five hundred, twenty six hundred, where is it now and what are the macro conditions coming up that will just create either you know, upward momentum or download momentum. But generally we've seen that upward momentum build. But I wouldn't get caught up so much in it. It's above two thousand is sustainable? This is treating more like a currency, And what we're seeing in the macro backdrop is that it's all supportive right now, so it can be sustained above two thousand. I think the question right now is how much above two thousand, and particularly, you know, as we get north of twenty five hundred, where will that momentum stop and giving our outlook for the US dollar to continue to weaken, we see tailwinds ahead for.

Look, I think gold should be treated more like a currency than a commodity, and so its level is less important than the factors that are driving into momentum. So when we look at gold, whether it's it's twenty four hundred, twenty five hundred, twenty six hundred, where is it now and what are the macro conditions coming up that will just create either you know, upward momentum or download momentum. But generally we've seen that upward momentum build. But I wouldn't get caught up so much in it. It's above two thousand is sustainable? This is treating more like a currency, And what we're seeing in the macro backdrop is that it's all supportive right now, so it can be sustained above two thousand. I think the question right now is how much above two thousand, and particularly, you know, as we get north of twenty five hundred, where will that momentum stop and giving our outlook for the US dollar to continue to weaken, we see tailwinds ahead for.

Stay with me, Vivic, We'll be back in a minute. My guess this morning is Vivica, Director of Mining and Energy Commodities Research as Commonwealth Bank moving on to iron ore training around ninety seven US dollars a ton. It hasn't sort of been at this level. It's been at this level but really consistently at this level for about four years or so. Jim Chalmers, a treasurer, came out and said it would cut the bottom line of the budget. Why is iron ore relatively cheap now compared to the last four years at less? And what's the outlook for that commodity? Sure?

Stay with me, Vivic, We'll be back in a minute. My guess this morning is Vivica, Director of Mining and Energy Commodities Research as Commonwealth Bank moving on to iron ore training around ninety seven US dollars a ton. It hasn't sort of been at this level. It's been at this level but really consistently at this level for about four years or so. Jim Chalmers, a treasurer, came out and said it would cut the bottom line of the budget. Why is iron ore relatively cheap now compared to the last four years at less? And what's the outlook for that commodity? Sure?

So, look, if I had to look at what we track for spot prices, we're actually closer to ninety dollars a time, So right now we're just south of ninety two dollars a time. And this compares with earlier this year we saw prices peak at about one hundred and forty four dollars. So we have seen iron or come off quite a bit in this year a lot. So this has been really the big driver and While we've seen iron ore flirt with going below one hundred dollars a time, we have now seen it sustained below that level for now a number of trading sessions, and that has alerted market attention because you've broken through a key barrier point and now everyone is asking how low can we go now to get to the bottom of that. It really comes down to one has driven it to these levels, and it is coming from very weak Chinese stealel demand. You know, we've talked previously, but the problems with China's property sector aren't going away. You know, there was an entire expectation that policymakers and there were announcements in May where they were going to intervene and put funding towards purchasing access inventory, converting that to affordable housing, and markets back then were optimistic that maybe policymakers have the right policy now to stabilize a sector that accounts for about your thirty percent of China steel demand. But what has become quite apparent is they're not funding that package as well as what the market needs it to be, and that has meant that the optimism has turned now to pessimism, and the property sector continues now to be a headwind for China steel demand. But what I think the market didn't expect is infrastructure, which is about twenty five to thirty percent of China steel demand that has also turns out, and the fact that we now have both infrastructure and property heading downhill, it has pressed on i OR significantly. And it is this pressure which is really what is galvanizing eye or closer than ninety dollars a ton, and have people worry that how we can can these two sectors get because the more it does, the closer the risk is that we get even below ninety dollars a ton. And if we look at idle prices since the beginning of twenty nineteen, whenever we have a severe downcycle in any of these kind of cyclical moments, eighty dollars a ton is where it usually bottoms out and then sharply jumps, and so the newer term we're thinking ninety dollars a time would be its bottom. But clearly the risk is eighty dollars a ton. So we're watching this space very very closely, but this is only temporary. Our view is that we will return back above one hundred dollars a time once it becomes clear that we cannot have a Chinese economy that is bleeding it its property and infrastructure sectors. They are such important parts of China's economy that we need to see them turn a corner, and we expect policy makers to provide that support because they are not going to get their growth to about around five percent this year if we continue to see what's happening in infrastruction, property persist for the remainder of twenty twenty four.

So, look, if I had to look at what we track for spot prices, we're actually closer to ninety dollars a time, So right now we're just south of ninety two dollars a time. And this compares with earlier this year we saw prices peak at about one hundred and forty four dollars. So we have seen iron or come off quite a bit in this year a lot. So this has been really the big driver and While we've seen iron ore flirt with going below one hundred dollars a time, we have now seen it sustained below that level for now a number of trading sessions, and that has alerted market attention because you've broken through a key barrier point and now everyone is asking how low can we go now to get to the bottom of that. It really comes down to one has driven it to these levels, and it is coming from very weak Chinese stealel demand. You know, we've talked previously, but the problems with China's property sector aren't going away. You know, there was an entire expectation that policymakers and there were announcements in May where they were going to intervene and put funding towards purchasing access inventory, converting that to affordable housing, and markets back then were optimistic that maybe policymakers have the right policy now to stabilize a sector that accounts for about your thirty percent of China steel demand. But what has become quite apparent is they're not funding that package as well as what the market needs it to be, and that has meant that the optimism has turned now to pessimism, and the property sector continues now to be a headwind for China steel demand. But what I think the market didn't expect is infrastructure, which is about twenty five to thirty percent of China steel demand that has also turns out, and the fact that we now have both infrastructure and property heading downhill, it has pressed on i OR significantly. And it is this pressure which is really what is galvanizing eye or closer than ninety dollars a ton, and have people worry that how we can can these two sectors get because the more it does, the closer the risk is that we get even below ninety dollars a ton. And if we look at idle prices since the beginning of twenty nineteen, whenever we have a severe downcycle in any of these kind of cyclical moments, eighty dollars a ton is where it usually bottoms out and then sharply jumps, and so the newer term we're thinking ninety dollars a time would be its bottom. But clearly the risk is eighty dollars a ton. So we're watching this space very very closely, but this is only temporary. Our view is that we will return back above one hundred dollars a time once it becomes clear that we cannot have a Chinese economy that is bleeding it its property and infrastructure sectors. They are such important parts of China's economy that we need to see them turn a corner, and we expect policy makers to provide that support because they are not going to get their growth to about around five percent this year if we continue to see what's happening in infrastruction, property persist for the remainder of twenty twenty four.

Okay, last one, oil we talked about goal being figgle vec. Erican oil is even more fickle. If there is such a thing for commodities, it's trading under IDUs dollars a barrel. Considering the tension in the Middle East, how susceptible are we to big moves in oil prices?

Okay, last one, oil we talked about goal being figgle vec. Erican oil is even more fickle. If there is such a thing for commodities, it's trading under IDUs dollars a barrel. Considering the tension in the Middle East, how susceptible are we to big moves in oil prices?

So look, I think oil is one that has been generally arrange bound as between seventy five and eighty five dollars a barrel, and this has been almost a play for the most part between demand concerns, particularly out of China, which is pressing on the lower side. So you push towards seventy five dollars a barrel, and then you have OPEC plus, which controls you know, we're talking forty to forty five percent of supply. They're curtailing production in order to support prices higher, and that helps you up towards that eighty five dollars a ballot. Now, this tension has been there for a while, it's the reason why we're so range bound. But where all that positive risk and where markets have been worried is what happens in the Middle East. You know, post this this Israel commassold that began in October seven last year, and how that tracks and the concerns over that. Oil markets certainly only pay like one hundred percent attention at price in a premium when they think actual supplies at risk. And you can see that because there's coutial, cautious optimism over truce. We've seen prices payback to Brent under eighty dollars a barrow. But the ability for that situation to really go the wrong way is absolutely possible. And if we look at what's happening, would say the market right now they're waiting for Iran to retaliate against Israel for the death of a senior Amas figure in Tehran. So in Iranian soil. Now, how that plays out and what that means is where all the escalation can take place, because if Israel retaliates to that by attacking Iranian oil infrastructure, the market can rally, I can rally quite strongly. And earlier this year when Around and Israel were fighting, we actually saw Brent rise above ninety dollars a barrow. So these risks are there. But until we see a key sequence of dots that we can connect and be like, yes, that's happening, oil markets won't believe it. They want to see it. And so the risk with oil in our view is we're talking seventy five to eighty five, but we have positive risk all related to what happens with the tensions in the Middle East.

So look, I think oil is one that has been generally arrange bound as between seventy five and eighty five dollars a barrel, and this has been almost a play for the most part between demand concerns, particularly out of China, which is pressing on the lower side. So you push towards seventy five dollars a barrel, and then you have OPEC plus, which controls you know, we're talking forty to forty five percent of supply. They're curtailing production in order to support prices higher, and that helps you up towards that eighty five dollars a ballot. Now, this tension has been there for a while, it's the reason why we're so range bound. But where all that positive risk and where markets have been worried is what happens in the Middle East. You know, post this this Israel commassold that began in October seven last year, and how that tracks and the concerns over that. Oil markets certainly only pay like one hundred percent attention at price in a premium when they think actual supplies at risk. And you can see that because there's coutial, cautious optimism over truce. We've seen prices payback to Brent under eighty dollars a barrow. But the ability for that situation to really go the wrong way is absolutely possible. And if we look at what's happening, would say the market right now they're waiting for Iran to retaliate against Israel for the death of a senior Amas figure in Tehran. So in Iranian soil. Now, how that plays out and what that means is where all the escalation can take place, because if Israel retaliates to that by attacking Iranian oil infrastructure, the market can rally, I can rally quite strongly. And earlier this year when Around and Israel were fighting, we actually saw Brent rise above ninety dollars a barrow. So these risks are there. But until we see a key sequence of dots that we can connect and be like, yes, that's happening, oil markets won't believe it. They want to see it. And so the risk with oil in our view is we're talking seventy five to eighty five, but we have positive risk all related to what happens with the tensions in the Middle East.

VEC thank you for talking to Fear and Greed.

VEC thank you for talking to Fear and Greed.

Thank you.

Thank you.

That was Vivek Dar, director of Mining and Energy Commodities Research at Commonwealth Bank. This is the Fear and Greed, a daily interview. Join us every morning for the full episode of Fear and Greed, daily business news for people who make their own decisions. I'm Sean Elmer. I'm sure you today

That was Vivek Dar, director of Mining and Energy Commodities Research at Commonwealth Bank. This is the Fear and Greed, a daily interview. Join us every morning for the full episode of Fear and Greed, daily business news for people who make their own decisions. I'm Sean Elmer. I'm sure you today