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In the Energy News Beat – Conversation in Energy with Stuart Turley and Wasif Latif from Sarmaya Partners to discuss the current state of gold, commodities, and global financial markets. Wasif emphasizes gold’s resurgence as a safe haven amidst rising inflation, geopolitical risks, and fiscal uncertainties. He touches on themes like central bank gold purchases, inflation trends, and the commodity supercycle, linking them to broader economic cycles and the increasing importance of tangible assets. The discussion also highlights the strategic role of gold and other commodities in navigating market cycles, drawing comparisons to historical patterns from the 1970s and 2000s.
Right now, there is a lot of focus on the investment and gold markets. We recommend checking your portfolio and asking trusted advisors to check your portfolio balance.
Please check out Samarya Partners Here: https://sarmayapartners.com/
Connect and follow Wasif on his LinkedIn Here: https://www.linkedin.com/in/wasiflatif/
Thank you, Wasif, for your time and for stopping by the podcast. I am looking forward to our next conversation. – Stu
Highlights of the Podcast
00:00 – Intro
00:58 – The Gold Conference and J.R.R. Tolkien Reference
03:30 – Gold’s Role in the Market
04:25 – Themes That Drive Market Cycles
06:09 – Commodities and Sub-Themes
07:37 – Uranium Renaissance
10:29 – Inflation’s Impact on Gold
15:49 – Geopolitical Risks and Central Bank Gold Purchases
22:02 – Real Interest Rates and Gold
26:36 – Fiscal Risks and U.S. Government Spending
32:17 – Outlook for Gold and Oil
36:06 – Final Thoughts and John Templeton Quote
37:17 – Conclusion and Contact Information
Transcript:
Stuart Turley [00:00:08] Hello, everybody. Welcome to the Energy News Beat podcast. My name’s Stu Turley, president and CEO of the Sandstone Group. There is a ton going on in the financial market right now, and everybody is sitting back kind of going, Where do I put my money? Do I put it in the mattress? Do I try to let the stock market play? But there is resources out there. And this is I believe it’s the third in our series with Wasif Latif. And he is the head guy over there at Somalia Partners. And I’ll tell you what, I just absolutely have loved the previous discussions that we have. And Wasif was at a gold conference. And I mean, I cannot wait to hear how this went. Wasif, welcome to the podcast and thank you so much for your time.
Wasif Latif [00:00:59] Thanks for having me, Stu. It’s the third time and it’s great to be on with you again. Thank you.
Stuart Turley [00:01:03] I’ll tell you, the first room went out and the other one is being released tomorrow morning as we are talking the day before this. So the folks have only seen it. And I’ve gotten some great feedback on our first. So I can’t wait for the feedback on the second one. But tell us what was going on and just give us a little bit of a thing before we get started, though. You and I were chit chat and gold. The Return of the King. This is a quote in your slide deck. All that is not is gold does not glitter. Not all of those who wander are lost. The old that is strong does not withered. Deep roots are not reached by the frost. From the ashes of a fire shall be woken. A light from the shadows shall spring renewed shall be blade that was broken. The crown once again shall be King J. J.R.R. Tolkien. That is a great way to open up a slide deck, I’ll tell you.
Wasif Latif [00:02:09] Yeah, it was fantastic. So I was at the Denver Gold Conference last week and I had the privilege of being one of the keynote speakers and we wrote our gold paper titled Return of the King as a tip of the hat to J.R.R. Tolkien and all of his work and Lord of the Rings. We’re big fans. And so all of our papers have, you know, embedded Tolkien quotes, Lord of the Rings quotes here and there. And so this one, it just made sense for the entire paper’s title to be, you know, something from that as well as the return of the King, Gold is being reestablished in the marketplace and being seen as something that is making a huge comeback, seeing new all time highs as we speak. And there’s a variety of reasons for that. And I discussed that in that presentation and in our conversation today. And so that quote from the book itself, it was just perfect, perfect sounding and just resonated. What we were were, you know, presenting there.
Stuart Turley [00:03:03] What an honor to be a speaker at that that event. Tell us a little bit about the Gold event last week.
Wasif Latif [00:03:10] So the Denver Gold Conference, it goes back many, many, many years and it’s currently held in Colorado Springs. And and there’s another one that takes place in Europe in the other half of the year. And it’s really a conference where gold mining companies and investors in those mining companies come together for updates, for reviews, for one on one meetings. And just to get a sense of where we are and between those meetings, there are these keynote presentations given by folks such as myself to talk about broadly about what they’re seeing in the marketplace, whether it’s the economy or broadly speaking, across the metals, commodities and gold space.
Stuart Turley [00:03:49] And when I was looking at your slide deck, getting ready for the show, there are some big topics out there and I got some questions for you on gold on this. So as we go through the slides, just to drive back over, the themes drive markets over multi year cycles. For Mr. Producer, this is, I believe, Slide three. And we had talked about teeing up how, you know, you take a look at some area partners and your mindset and I really return the tangibles. So it’s not return of the King, it’s return to tangibles. But then you have the king of tangibles.
Wasif Latif [00:04:26] And so, you know, as we’ve discussed in our prior conversations, so the essence of what we do is we’re thematic investors and we look at the broad market. And this slide to us is basically our story. It says every major market cycle is driven by some theme, and that one theme dominates that market cycle. And if you can identify with greater degree of confidence and harness that to investing in those types of assets that are represented by that theme and focus and build a concentrated. Portfolio. You should be able to do really well throughout that market cycle. And so that is the essence of it. And so our view is that the new market cycle and the new theme has already begun and that theme is a commodity supercycle after pretty much a decade of being ignored, being unloved and and marked for basically, you know, a commodity, if you will, that’s really not going to be as important or as needed in a new digital intangible world. And what we’re saying is, no, that’s not the case. The pandemic and all of the factors between geopolitics that have come after that have reignited the desire and the awareness that we still need all those commodities. So the commodity supercycle, in our view, began around 2021, 2022, and it is still ongoing. This is going to be a multiyear experience and we’re calling it the return to tangible that, you know, the world is returning to the importance of those things that we need to not only grow economically, but just to live and breathe and survive.
Stuart Turley [00:06:10] You know, on Slide four, Mr. Producer, when you take a look at a slide for the 2020s and then you have the 88% and the 48% down there, what does that mean when I’m looking at that?
Wasif Latif [00:06:23] So what we did, we wanted to show the comparison of each one of these major themes in history against the broader market. Okay. The lighter the lighter color gray line is representing the broader market through the S&P 500 index.
Stuart Turley [00:06:40] And then the commodities is the.
Wasif Latif [00:06:41] And and the dark green line. In the case of the return to tangibles, all the way at the end is being represented by the broader commodity index. And this is the period that we think it began. It has done better than the market. And you know, just like the other prior cycles show, nice since the beginning. And it’s going to be, you know, potentially a lot more than what we’re saying.
Stuart Turley [00:07:06] So when we were we were talking last, last time last year, but I got it. I got so excited because our our uranium talk was so spot on. And I just cannot wait to get feedback on this. On Slide six, you’ve got a great, great exposures. Oil and natural gas, you’ve got the exposures that are out there, uranium and nuclear, and we covered that one. And today I’ll be talking about your vision on gold and what that is. Is that a fair statement flow?
Wasif Latif [00:07:37] So what we do is we want to break down this big return to tangible theme into digestible, understandable subthemes or components, right? And so when we think about the world commodities and they’re just one they’re not just one big blob. Each one has its own usage need and reason for doing well or not doing well. And so what we laid out was this set of subthemes that we think are going to be the drivers of these underlying commodities. So the big one that we’ve talked about, you know, is the broader component of of those those those subthemes energy is life is a big part of that. And I know we’ll have a conversation about that at some point, which is oil and gas. Right? Then there’s one about uranium or nuclear, which we’re having a renaissance. And, you know, there’s recent news in the market that’s talking about it. And then there’s other subthemes around building the future, which is going to need things like copper and infrastructure, like copper. So we’ll talk about that copper at some point as well. And then there’s.
Stuart Turley [00:08:41] The without without interrupting you. Without interrupting. Did you have Wassif on your bingo card? Three Mile Island opening again with Microsoft, you know, getting a 20 year contract with the nuclear reactor opening again, I did not have that on my bingo card.
Wasif Latif [00:08:59] Well, I didn’t I didn’t have that specific statement when I But what we do know is, you know, we’re calling it the nuclear renaissance for a reason, Right? You know, the world is coming back to the idea that if we want sustainable energy that is abundant, Right. And that is cheap and pound for pound can deliver the best intensity in terms of the usage and and, you know, the strength of that. You can’t beat nuclear. And and, you know, as I talked about last time, the technology industry with its influence and impact is now getting behind nuclear. And there’s nothing like somebody like, you know, large industry like technology saying, you know what, this makes sense. And so now, you know, it’s it’s it’s off to the races for anything attached to nuclear, whether it’s the utilities or the commodity itself like uranium.
Stuart Turley [00:09:53] When when you were given your your talk And what was the buzz at the gold conference. Because inflation is I mean, if you take a look at a practical cost of inflation, insurance rates are up 70%. You know, 50 to 70%. Energy rates across the U.S. are up 50 to 80%, depending on which kind of one you want to look at. What were you hearing out there? And then on your ear, you get several slides on inflation. And I don’t know which one you wanted to kind of address, but tell me what your thoughts are on inflation and how you’re looking at gold against inflation.
Wasif Latif [00:10:30] Sure. So, you know, in one of the slides, we have this high level talking about the drivers of gold. One is inflation and one is, you know, what happens to the budgets of a country like the fiscal situation and then the geopolitical side of it, too, as well, because gold is also seen as a safe haven. And so between those three drivers, you know, all of them are beginning to have an impact on gold or have been having an impact on gold for the better part of the last four years. The the buzz around the conference, your question was generally around gold is finally, you know, being recognized and kicking on all year. But we still we still think and this was just a general consensus and it is our view as well, right, is that, you know, we’re likely to see greater highs and higher highs for gold prices. We don’t know exactly how high or where they go, but all all of these factors are indicating higher prices. And the other pieces, because this is about gold mining companies. You know, the question was, when do the stocks of the gold mining companies begin to see that upside and participate as well? And you’re beginning to see that as well a little bit in the market. So I think there’s been an uptick in that. And, you know, there’s nothing like the price pulling in outsiders or pulling in people who aren’t paying attention or even reluctant buyers who might have been skeptics. And when that happens, not only are they going to participate in the commodity itself, but in order to get the operating leverage and the financial leverage that some of the gold mining companies are going to offer, that’s when they’re going to start doing well as well. So so, you know, those are three components. And we can go through each one of these between inflation and fiscal risk and geopolitics.
Stuart Turley [00:12:18] Yeah, the inflation part of it, I believe this is being put out on Slide nine for Mr. Producer. It’s an excellent chart. I mean, when you take a look at the year, year over year, inflation change. Gold is done quite well.
Wasif Latif [00:12:32] It has. And it shows the relationship that inflation generally has a fairly strong or gold, I should say, has a fairly strong relationship to inflation. And when you think about it, it kind of makes sense where, you know, inflation implies that there’s a negative interest rate that’s taking place. And because of that, there’s the loss of purchasing power of fiat currency or decline of that purchasing power. And when that happens, then, you know, gold as a sort of a store of value in real terms generally holds up better. And so that’s the relationship there with, you know, you lag the price a little bit for gold and you can see that relationship clear. So what’s been happening is you saw that in the 1970s and then it came down and sort of, you know, bounced around in in the intervening years. And now you’re starting to see that resurgence in gold because of the inflation episode we saw. So if we look at the other slide that shows inflation from the 1970s to inflation that would be experienced up until now, since the 2020 year. To us, it looks like we’re pretty pretty close to tracking what happened in the 70s. You have this initial surge in inflation and then it came down and that’s where we kind of.
Stuart Turley [00:13:47] Had Slide ten. And then I’m looking at pretty, right?
Wasif Latif [00:13:51] Yeah. So on that slide, you can see that, you know, in the 1970s when we think about it, we’re like, yeah, inflation was high in the 70s, but we don’t realize the journey it took during that decade. And the journey was it spiked up, it came down. And when it came down, you know, the Federal Reserve and the authorities relaxed a little bit and they lowered rates and then it went back up. Why? Because inflation wasn’t truly out of the system. The thing about inflation is that it’s pretty pernicious once it gets into the economy and the human psychology. Right. Has to move around and it’s not really completely stomped out or pushed out until you have a much more higher for longer and really a recessionary type of an environment. And so in our view, you know, this might be resembling what we saw in the 1970s where inflation has definitely come down. We know that, right? But is it completely out of the system and gone? Our view is not. And therefore, the the celebrations and sort of the the, you know, the mission accomplished type of. Sentiment that’s in broader market consensus, I think is we think is premature. And you’re going to see a resurgence of that. And it could be in the shape of commodities pushing inflation higher. It could be in the shape of all the stuff that you talked about. These costs and wages continue to go up with greater organized labor activity as well. So all those things will continue to put upward pressure on inflation in our view. And we might revisit it might not look exactly like the 70s, right? You know, we might get another flavor of it. So the one of my one of my pet phrases when it comes to this chart is you better get your bellbottoms out. We’re going back to the 70s. My gosh. You know, and it’s just a joke that I make. But the point is that we think that that was in the past and we’re not going to repeat that, whereas we think there’s a risk that we end up actually repeating a similar pattern.
Stuart Turley [00:15:49] Well, and on Slide 14, I’m going to jump over to you mentioned geopolitical risks, and I absolutely loved Slide 14. That was absolutely phenomenal. The title of It’s Geopolitical Risks Global Central Banks, Gold purchases and Tons. China is absolutely buying everything they can. Russia is buying everything they can. And it seems that I’ve heard this number was often you have to fact check me. But I think that we can only increase the world supply of gold by about 4% a year. So that’s a very good hedge against inflation, if I understand that correctly. But how does BRICs coming around as a competitor and we’re looking at this as a real competitor to the swift financial system are out there are BRICs is getting some serious headwind, but it’s being looked at being backed by gold, which is a good thing for gold. Was there any of that in the discussion point it at the at the conference?
Wasif Latif [00:16:55] I mean, these are definitely part part of the the factors that go into the strategy and the and sort of the portfolio and the outlook for gold for sure. So the way to think about it. So let me start with a slide for us. So this slide is showing the buying of gold by central banks around the world going back in years. Each bar, each bar represents a different period in time. Right. And as you can see, it’s very clear visually that you have a certain average level of buying for many, many, many years. And then in 2022, you see a jump. And that jump is an increase in the buying of gold by central banks. And and that is a clear demarcation of what is what happened geopolitically, which was at the because of the financial sanctions that the U.S. issued on Russia after the invasion of Ukraine, the U.S. dollar reserves that Russia had were taken away. And that sent a clear message to all central banks and all governments around the world, friend and foe alike, that your dollars are not your dollars if you decide that they’re not. And and because of that, and it makes sense from their vantage point, just incredibly to begin to diversify away from those dollar assets that they have. Right. So since then, you’ve seen an uptick in buying in gold, and that uptick is largely being represented by China, as you mentioned, but other central banks as well. Russia’s doing it through, you know, if they’re selling oil, they’re using that to buy gold. They’re receiving gold in lieu of dollars for oil that they’re selling. Right. Other countries as well have increased the pace of the amount of gold that they’re buying. And they’re just doing it to diversify away from the U.S. dollar asset base. You brought up the BRICs phenomenon of what’s happening right now. Those are very, very, very slow moving. It’s been you.
Stuart Turley [00:18:53] Know, they’ve been trying to get in there for quite a while.
Wasif Latif [00:18:56] It’s it’s been trying it’s been happening for a very long time. Right. And at the core of it, I think it it it is it’s it comes back to those countries wanting to diversify away from the U.S. dollar more for financial reasons than anything else, but also for political independence and geopolitical independence as well. And as a result of that, there’s been greater increased gold demand as well. Right. And and some of the proposals out there include having a, you know, a different type of a reserve asset, which would be a basket of different assets such as gold, such as other currency that could be combined to make a different type of reserve asset that’s still far away.
Stuart Turley [00:19:40] President and President Trump just said he would think about putting Bitcoin in there as a Federal Reserve. Holy smokes, Batman. I was like, get. I would have never expected that comment from a political presidential running person. Holy smokes.
Wasif Latif [00:19:57] So that that. Also on the table. We’ll see what the final what the final makeup looks like of that basket. But, you know, you could see a digital asset of sorts. You know, with the digitization. One of the interesting things with technology is central banks can just digitize their own currency as well. Obviously, it’s still backed by, ooh.
Stuart Turley [00:20:17] I don’t want.
Wasif Latif [00:20:17] That same stuff that they had. So but my point is that that is a process that’s underway. And these things take a long time to unfold. Right. And they’re not we’re not there yet. But it is one of the slow moving possibilities that we do get some kind of a monetary adjustment or a monetary reset in the future. And we’ve seen those in history. They you know, we had 1 in 1971 and then we had one, you know, afterwards when we converted to from gold standard to a petrodollar standard. And and prior to that, it was post World War Two. So monetary resets occur and it’s not the end of the world. It’s just an adjustment. And and it might occur, but it’s not necessarily an imminent thing. It’s not necessarily going to happen tomorrow. Or it might be just something that continues to go on and being processed for some time. And we might need an event that might accelerate it. In the meantime, the geopolitical side that is continuing to drive gold today is the need for these countries and the central banks to want to diversify away from the dollar assets that they have. So that’s the geopolitical side that’s continuing to drive it. And one interesting chart is that shows the relationship between real interest rates and gold. And so whenever real interest rates go down or decline, gold generally goes up. So in this chart, we’ve inverted it just to show the relationship. So as you can see.
Stuart Turley [00:21:55] That would be Mr. Producer, that Slide 11, inflation gold versus the real yield is at it.
Wasif Latif [00:22:02] That’s correct, yes. Okay. So real rate, real yield is basically you take you take the current interest rates that are available at the current market rate, you subtract from it inflation and then you get the real interest rate or the real yield. And that just basically means if you adjust for inflation, what is the real yield? And if real yields are declining or negative, that means the ability for folks to earn money on their money is declining or in negative territory after you adjust for inflation. And whenever it is in a declining phase, then gold generally goes up because that has a store of value where holy smoke. So and this is this is a long standing relationship. And as you can see, it’s a pretty close relationship that tracks it until 2022. And in 2022, you saw real yields begin to do better. In other words, as inflation began to come down. Right, the real interest rates turned positive or they started to move upward, which would have meant that gold should go down. But gold, as you can see, didn’t go down, you know, going up. And the reason is the geopolitical side, in our view, the central bank buying, because those buyers are indifferent to U.S. inflation, They are indifferent to U.S. rates. They are actually even indifferent to the near-term nominal price of gold because they are buying it for a very, very different reason. This slide presents their portfolio.
Stuart Turley [00:23:39] This is a critical slide.
Wasif Latif [00:23:41] So so this this sort of shows that there’s another buyer out there that is indifferent to real rates. Right. And irrespective of what real rates do will continue to be a buyer of gold. So there’s another sort of a bullish driver, if you will, for the price of gold, whether inflation in the US continues to be stable or not. Our view is inflation is going to go up. And you can see that at the very tail end of that chart where you see this hook up in both real rates are also turning negative and gold prices continue to go up. So that could be another double whammy as well, where you’re starting to see some of that as well.
Stuart Turley [00:24:21] Wow, Excellent information. I’ll tell you, relying on people that actually understand multi faceted issues, I get tickled at oil traders or energy traders that are only focused on their one little tiny, narrow channel and massive. I got to hand it to you and your whole team because you’re looking at this from an entire world basket as opposed to a lane. You’re you’re looking at the whole cotton pick and 16 lane highway as opposed to the one lane and then the ditch. So, I mean, this is cool. I’m a. Excited about all this.
Wasif Latif [00:24:59] Thank you. Yeah. So, I mean, what we’re trying to do is look at the big picture and that’s what, you know, the first slide with the the themes. You know, for us it’s about the big picture. And within the big picture, if we know what the long, big picture journey is going to be, we want to be able to access all of the things that are going to drive it. So it’s not just energy. It’s not just gold, it’s not just copper. It’s all of those combine in different ways. And what we do is we we try to actively manage those exposures over time as they can flow through that cycle.
Stuart Turley [00:25:35] You know, I’ll tell you, I had several like 5 or 6 epiphanies in this podcast. And for a podcast listeners, I have the lights are going off in the back of my head, shining on the wall, almost like a disco ball. You know, I’m over here having my own disco listening to this thing. But when you sit back and look at the uranium, the same thing happened in our uranium discussion. Watson Because this is exciting that you’re not just looking at the link, you’re looking at the old cotton pickin Highway going across the country.
Wasif Latif [00:26:05] Yeah, absolutely. You know, we talked about the inflation side and we talked about the geopolitical side. The other piece that is, in our view, also contributing to gold is the fiscal situation, especially in the U.S. But generally speaking, broadly speaking, the fiscal situation across all of the developed Western sovereign nations. Ever since the great financial crisis, most sovereign nations have continued to accumulate higher and higher levels of debt.
Stuart Turley [00:26:36] In their fiscal risk for the U.S.. I’m sorry for interrupting you because this I get airsick just looking at slide number 13, defense spending versus net interest expense versus this is from the title is Fiscal Risk Congressional Budget Office 1010 year budget projections. We have a government that is needs to be shut down. In my opinion. They do not have the right to spend our money. Net interest expense. This just makes me airsick.
Wasif Latif [00:27:07] This is a you know, there have been a lot there’s been a lot of ink that’s been spilled and commentary that’s been written for many, many, many years. Right. About how our our budget is stretched and we’re spending a lot. And, you know, the thing is that if you have the reserve currency and you have a bond market that’s willing to support your spending, you can you can do that for a very long time. Right. What happened is in the pandemic timeframe, the government and it isn’t just the U.S., it’s pretty much the government they started spending at war time level of spending. And you can see that in Slide 12, which is the actual U.S. budget deficit. And you can see that the budget deficit, you know, started to getting worse and worse in that period. Right. The projections and these are these are not our projections. These are the government’s own projections of what they expect should be paying. So our takeaway is, you know, the policymakers and, you know, we are generally neutral from from who’s going to be doing the spending because to us, irrespective of what who comes in, this spending is going to occur. And so the politicians have gotten the taste of fiscal spending, and that’s hard to put back once they get a taste of it. And so because of that, there’s going to be continual pressure on the market. And those who are worried about it are also looking at gold as an alternative in case there is a fiscal accident and a fiscal accident can occur potentially in the shape of what happened in the you.
Stuart Turley [00:28:44] Of fiscal accident. Sounds bad.
Wasif Latif [00:28:48] Well, it it could be just a minor fender bender. And I’ll tell you what what that could look like. So. Okay. In in the UK a few years ago, there was this budget that was passed by the then-Prime Minister Liz Truss, and the budget was very Liberal and it was spending a lot of money and without much cutting on the cost side. And the assumption was that the bond market will help us pay for this by issuing more bonds. And what happened was the UK Gilt market, which is their bond market, in essence revolted, where bond yields started to jump higher. And and so now that moment is seen as the Liz Truss moment where the bond market says, we’re not going to let you spend the amount of money that you want to spend. Right. We need to start, you know, implementing some fiscal discipline. And we might be seeing that in the US at some point. We don’t know exactly. But in the meantime, what’s happening is the price of gold is also showing a little bit of an interest from folks as a as a as a substitute, if you will, not only for. Fixed income side for the right for bonds, but also in the case that this continues to go and being spent and deficits continue to run higher, because what happens is in the country, when you have uncapped or unwatched fiscal spending and deficits run higher and higher and higher. Right. Generally, the outlet is that your currency starts to weaken. And our advantage is that we have the world’s reserve currency. And because of that, we’ve been we have a lot of room in our ability to borrow and spend, but it’s not endless. And so the point is.
Stuart Turley [00:30:32] The rope is getting shorter, in my opinion.
Wasif Latif [00:30:34] Right. And that’s what gold is reflecting and that’s what, you know, the these budget projections are reflecting as well. So in our view, you know, you can have a couple of scenarios in the future that help you get out of this debt hole. You can either implement austerity, severe budget cuts, severe rates of a lot of things. But the way our spending commitments of work that looks a little bit tough and also, you know, elected officials generally don’t want to implement that in the US.
Stuart Turley [00:31:01] You wouldn’t make a fantastic person in the next administration. Are you open for picking up the reins?
Wasif Latif [00:31:10] No, I’m I’m perfectly fine being your money manager. Thank you.
Stuart Turley [00:31:13] But you would know what the heck’s going on. And I think that I’m going to nominate you.
Wasif Latif [00:31:17] Because I appreciate your confidence. The other the other way of getting out of high levels of debt is through inflation. If you inflate your way, your debt, the value of that debt that you owe over time declines. Right. Because it’s in nominal terms. And so historically, many countries and empires, as they have amassed high levels of debt. One way to reduce that debt burden has been through gradual inflation and that inflation can be in the shape of, you know, the inflation that we’re seeing, but also in the in the shape of a declining currency value. And so all of those things and we and just to be clear, we’re not exactly sure how this transpires or what happens, but at some point, either we’re going to have a combination of some fiscal discipline combined with some inflation. And all of that to us means you’re going to need some other means of store of value. And gold continues to be that for us.
Stuart Turley [00:32:18] Gold and energy seem to be fairly safe bets.
Wasif Latif [00:32:22] They are, I think given the the economic macro economic and the geopolitical backdrop of where we are in the world today. Right. In our view, the outlook going forward, maybe call it seven, ten, 12 years, right? Is that gold and oil are poised to do well. And you saw that in the 70s when the very first chart, again, when we looked at the big themes, Right. That theme chart for the 1970s, that was all oil and gold. And so so there’s there’s a precedence there. So in one of our slides here towards the the.
Stuart Turley [00:33:01] Slide that you just mentioned for our podcast listeners is Slide three. And Mr. Producer, if you’ll bring that up, just to refresh folks here, I love this slide was if you guys did a great job, the 70s was gold and oil. 1980 is titled Japan and that area 1990s was the Internet boom to thousands was in India and commodities 2010 as U.S. tech in 2020s was returned to ten tangibles commodity supercycle that we’re in now.
Wasif Latif [00:33:33] So the EEM is emerging markets because because China was growing rapidly and industrializing and importing commodities left and right. That was the big boom in that decade. I will, I think Slide seven is helpful to highlight sort of the longer term price of gold going back to the 1960s and sort of the the bull markets that we have seen for gold during those periods. And so you saw the big bull market.
Stuart Turley [00:34:00] I loved the 70s show meets the 2000.
Wasif Latif [00:34:04] So that that’s our punch line. So so if you look at the first bull market, it was the 1970s or a combination of inflation and supply shock. It was stagflation. And, you know, it was concerns around budgets in the night, in the 2000s. It was a global growth environment, right. Due with inflation generally good sort of overall economic growth. But it was an era where the rest of the world was becoming economically better or improving and their purchasing power was improving. And that allowed for a lot of gold buyers domestically and overseas to continue to acquire gold. It also was the era when investment products like gold ETFs were created, gold company stock ETFs were created, and that also allowed for a lot of investor. So to us, it looks like, you know, if the rest of the world continues to grow, emerging markets to us are poised to return to their growth. Whether it’s India, even China, for that matter, Indonesia, these are very, very large countries. And their growth and their need for energy, their need for broad commodities is going to continue to grow. And so between the fiscal risks and the geopolitical risks that we’re facing today and the inflation that might still be lurking in the system, that reminds us of the 70s and then the growth that we’re seeing in the rest of the world. And even for us, if we go back to building our infrastructure, if we go back to building more and more technology oriented infrastructure like data centers or nuclear power plants, all of that is going to be similar to what we saw in the 2000. So that’s why we think this new run up in gold could be a combination of the two.
Stuart Turley [00:35:54] Wow. This is this is cool because this is one of the best well-articulated explanations, again, of what is going on. Thank you. Do you sleep at night?
Wasif Latif [00:36:05] Yes.
Stuart Turley [00:36:06] Yeah. Yeah. I was going to say, you must either read a lot or you. Absolutely. You’ve got too much going on. I do love your last slide in the. The bull markets are born on pessimism, grow on skepticism, mature on optimism and die on your Florida Sir John Templeton. That is a great quote as well too.
Wasif Latif [00:36:28] It’s one of my favorite investment cards, John, for John Templeton, you know, legendary investor, founder of Franklin Templeton and Company many, many, many years ago. And so I love this quote because it within a quote, he is highlighting an entire market cycle. And to us, we highlighted the yellow part in the middle, the second row, because we think that’s where we are for gold. There’s still some skepticism out there. I still come across many people who are skeptical of gold price or its place in a portfolio and which is good because that’s how, you know, they they will reluctantly continue to buy in. And so our view is that we’re still in that phase of this bull market for gold and that it likely will continue for a few years to come.
Stuart Turley [00:37:17] This is cool. Well, thank you so much. How do people get a hold of you?
Wasif Latif [00:37:21] Well, Sir Maya Partners is our firm and the best way to get a hold of us is through our website at sir my partners.com. I’m also available on Twitter with Sir Maya Carr so sir Maya with the KKR 24 at the end those are the best ways to get hold of us. And on our website there’s an insights page where the paper Return of King is available, as well as our other papers on broader energy and and a broader return to tangibles.
Stuart Turley [00:37:50] And that’s Sumeria partners.com correct yeah.
Wasif Latif [00:37:53] Some my partners.com you.
Stuart Turley [00:37:55] All right well thank you for stopping by the podcast today watch this I do appreciate your time and I’m looking forward to our next conversation.
Wasif Latif [00:38:02] Likewise. Thank you so much for having me. It’s always a pleasure talking to you. And we’ll speak next time. All right.
The post ENB #222 Gold’s Comeback: Inflation, Geopolitics, and the Commodity Supercycle appeared first on Energy News Beat.
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