David Wilson: Gold is an Attractive Asset for Today’s Monetary Environment
David discusses what the metals markets were like when he started out in the industry some years ago. He studied the commodity markets and in particular, the metals when he worked at the CRU. Those markets were far easier to understand then than what we have now. Markets were not nearly as financialized, and there weren’t algorithmic driven trades. Trading was all about market fundamentals.
The 1990s were a time of weak activity with low capital expenditure in commodities much like today. Things started to take off in the 2000s, with China becoming a major metals consumer and fabricator. Today, there is again a general disinterest in the commodity space, but gold is beginning to pick up. We have had several rate cuts with further expectations of additional easing in Europe. These easing cycles cause gold to look quite attractive in a portfolio.
The fundamentals for copper look quite good as the supply is constrained, and demand is still at acceptable levels. Copper, however, is struggling with recession fears, continued trade concerns, and a lack of investor enthusiasm. Over the longer term, electrification of transportation will improve the demand for copper, but that timeframe is uncertain. Overall, demand should remain strong for copper as it will take several years for new copper supply to come to the market.
Palladium has outperformed over the past year. Automobile manufacturers have switched to more gasoline centered offerings, and countries like China and in Europe are demanding more stringent emission regulations. Above-ground stocks of palladium have gotten quite tight, but electric vehicles are now the development focus for manufacturers. The bottom line is that the palladium market should remain tight with further upside potential in prices.
Time Stamp References:
0:40 – How the commodity markets have changed.
2:55 – Impressions of the current commodity cycle.
6:40 – Copper market fundamentals.
12:00 – His hands on approach to learning.
14:20 – Outlook for palladium.
Talking Points From This Week’s Episode
- How the markets have changed in the past twenty-plus years.
- The fundamentals for copper and electrification.
- Remaining potential with palladium.
David Wilson’s position until recently was as a commodity strategist for Freepoint Commodities, joining the company in 2017. He has over 20 years of experience as an Economist/Analyst/strategist, primarily covering metals and energy markets. From 2011, he was Director of Metals Research and Strategy at Citi, responsible for short-term and long-term base metals forecasting, analysis, and trade strategy.
Previously, David worked for Societe Generale as Director of Metals Research from 2008 to 2011 and for Norilsk Nickel from 2005 to 2008 as Senior Economist. Before that, David held various positions, including European Oil Markets Editor at Platts, Market Analyst at KWI covering European energy markets, and Senior Consultant at CRU International Ltd, covering aluminum and energy markets.
David holds a BA in Economics and an MA in Economics & Policy Analysis, both from the University of Nottingham. He also studied Journalism at Birkbeck College.