When it comes to understanding major currency movements, it’s clear that we’re seeing global USD weakness today. The BBB (big, beautiful bill) will highlight this and, in line with the interests of the U.S. government, ensure that the dollar remains under pressure. After 15 years of appreciation, this is long overdue. The USD is also massively overvalued against virtually all emerging market (EM) currencies.
The Core Thesis for the Second Half of the Decade
Rather than reducing their investments, countries will expand them.
Europe and Asia will lead the way, and Africa and Latin America will benefit. The United States can hardly increase its already high level of investment without putting its public finances at risk, but it will not reduce it, either.
Therefore, commodity prices will rise.
Many essential raw materials, such as copper, silver, platinum, and “rare earths,” are in short supply.
This will demonstrate the large gap between supply and demand. The main reason for this is that insufficient investment occurred during the 15-year commodity price recession to meet future demand.
The last 15 years have shown that corporate governance is underdeveloped in many companies. Corruption is rampant in many resource-rich countries, and this has led to problems during regime changes. Political risks associated with extracting raw materials are increasing, which inhibits investment in this area.
Some price increases will be explosive. The increase in the price of platinum this year (+50% in the last three months) is an example of this phenomenon. There is a structural supply deficit of one million ounces per year (12% of demand), and there are only three million ounces in reserve. It was foreseeable that this would lead to price increases at some point, and now they are here. I predict that platinum, which has lagged behind gold for 15 years, will rise much more sharply than gold, surpassing its price by the end of the decade. Currently, platinum stands at USD 1,356 per ounce and gold at USD 3,339 per ounce. I predict that the price of gold will reach USD 5,000 by the end of 2029, and the price of platinum will reach USD 6,000/ounce. Silver is at 150 (today it is at 36).
Is a Broad Commodity Rally Likely?
Much will depend on how energy prices for gas and oil develop. However, I assume that climate change will force us to use less coal, oil, and gas, and to work towards massive electrification.
However, we need vast quantities of metals for electrification, and we need them quickly. Given the initial situation of supply deficits, we expect the price trend for metals to be volatile.
“The good thing is that prices can rise. The response of Western governments will be to print more money, which is why I am confident about the development of precious metal prices. As long as the USD is hedged where necessary, it makes sense to invest in precious metals. Otherwise, it does not make much sense.”
This development would benefit Brazil, Indonesia, Peru, Chile, Colombia, and many other African countries.
