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You're listening to Strictly Business
Podcast with Lindsay Williams.

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Global metal prices in US dollars are
being pushed and pulled.

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They go up and down on a daily basis,
sometimes hourly basis.

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With me now is Portfolio Manager, Natural
Resources at 91 in London, George

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Cheveley. George,

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is it me or has the relationship suddenly
changed between certain metals and what's

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going on in the world?

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Because it used to be that when there was
a flare up, then the gold price would go

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up.

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And now when there's a flare up in the
Middle East with the war on Iran by the US

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and Israel,

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what happens is that the gold price goes
down because the dollar goes up.

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It's all very confusing to me.

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We've actually seen previously, if you
remember the early weeks of COVID in early

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March 2020 in the financial

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crisis, in the first sort of risk off when
markets are falling, we've seen gold fall

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at those points.

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And it's really a source of liquidity for
many funds because it is such a liquid

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asset.

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and people use that to cover redemptions,
etc.

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But obviously, this time, people are
looking at oil price rises and saying,

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could this cause less likely, shall we
say,

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that interest rates fall and they could
even go up?

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My own view is, I think that's overplayed,
and that obviously,

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oil price rises initially will actually
dampen growth and therefore, you know,

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could actually mean that interest rates
don't need to go up.

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I think economists would say the worry is
the second order effects.

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It raises costs of living and people
demand higher wages.

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And that's why you get the worries about
interest rates.

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But I think at the moment, I mean, the
uncertainty is just leading to people, you

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know,

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selling risk assets generally.

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Yeah, but it is almost instantaneous these
days.

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I mean, look at the gold price now as we
pre-record this podcast on Thursday

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morning, London time.

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We've got...

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the gold price down 2% and the dollar up
just a couple of pips.

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So there's a lot of sensitivity.

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The other thing that I thought of was the
activities of the miners themselves

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globally, because with yields rising,

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therefore the gold contango goes out a bit
and therefore it's more attractive to

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hedge.

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Have you seen any activity in the hedging
department?

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I've not seen it personally.

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I think one of the concerns for a lot of
gold miners at the moment is not so much

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the

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the gold price is because obviously there
are two things on the oil.

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One, they're worried, obviously, rising
costs of diesel could squeeze their

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margins.

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But margins are at record levels.

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So, yes, it does affect them, but it's not
going to be that terrible.

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More of a concern is whether they can get
diesel.

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And that's increasingly particularly
countries like Australia are worrying

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about diesel supply generally.

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So it's not a question of margins being
squeezed as having.

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Really no margin because they can't
produce.

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And that's clearly, you know, miners, as
they say, are pulling out their COVID

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playbooks.

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How are they going to cope?

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I mean, clearly they can cut back on
stripping, cut back on diesel usage.

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But it is going to, you know, if this
continues, it probably needs to continue

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another couple of months.

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But it could start to affect operations.

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Given what's happened to gold, in other
words, it's fallen quite precipitously.

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There's been a couple of days when it's
been down 10% in US dollar terms.

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This Monday, actually, the Monday that's
just passed was one classic example of

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that, with Mr.

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Trump being the main fundamental there.

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But also we had the fall from 5,626, the
futures price,

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right back down to something like 4,400 in
a couple of days.

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Do you think that marked the peak of the
market, which has run, let's face it, from

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2,000 in quite quick time?

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I think it's too early to say, frankly.

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I'd remind you the average gold price in
Q4 last year was just under 4,200 an

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ounce.

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So we're still above that even today.

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And the average for this quarter is well
above that.

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So we're looking at companies are going to
have absolute record earnings and cash

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flows this quarter.

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And silver also, which has fallen, only
averaged $53 an ounce Q4 last year.

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So we're still looking at prices, you know
well above where they were last year on

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the whole so

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This is still very profitable times.

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As I say, the main concern is around fuel
supply for a number of miners.

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But other than that, these companies are
still making record earnings.

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What about the industrial metal complex
now?

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Let's start with white metals, if we can.

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Again, I'm looking at my screen, 2.5% down
for palladium, 3% down for platinum.

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And so it goes on.

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They've also fallen very, very sharply
indeed.

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What's their future?

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Yeah, I think, again, we had quite a long
market coming into this, I think, and

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therefore we've seen a lot of risk off.

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I think on this side, there is a concern,
really two things.

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One, that we get obviously a pullback in
global demand, a slowdown in global

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growth.

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And that will mean, you know, purchases of
cars generally are lower, which is

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obviously bad for catalyst demand.

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and on top of that if We believe oil
prices are going to remain higher.

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That means higher diesel, petrol prices
longer term.

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You know, some people are now wondering if
that's going to accelerate the move to EVs

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again,

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which in some ways has been going the
other way.

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So I think there is a longer term concern.

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Does this encourage, you know, people to
move more electric more quickly?

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About a year ago, you were very, very
enthusiastic about copper.

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About a month or six weeks ago when we
last spoke, that enthusiasm.

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had waned.

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And you're absolutely right, because at
the time, it was around about $6.10 per

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pound.

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It's now $5.50 per pound.

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Do you maintain that outlook of caution
when it comes to copper?

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Yeah, I think we remain cautious.

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I must say, on the one side,

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we've actually seen some quite good buying
from China as copper has come down to sort

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of

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$12,000 a ton.

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And it does seem that China has
essentially is happy to buy it.

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higher levels now than they were last
year, where they seem to be supporting it

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more like a 10,000.

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So they seem to have moved up their base
price.

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But going forward, we do still see, you
know, supply, you know, improving this

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year.

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And also, at the same time, we do have
concerns about demand growth,

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if we see these oil prices remain higher
for longer.

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So I think maybe, you know, copper it
doesn't move too far.

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I think the case for it going upwards is
still not that strong.

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What does it mean for your portfolio
construction?

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Because you can't ignore it.

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I mean, you might say to yourself, OK,
this might just be a blip and the base

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case remains.

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What is your base case and does it remain?

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Yes.

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So if you look at the Global Natural
Resources Fund, we have been pretty active

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in the last month.

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We were just underweight energy, which is
around 40 percent of our benchmark a month

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ago.

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We're now significantly overweight because
our view is really whenever this resolves,

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whether it resolves quickly or in the
longer term, we believe either way, oil

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prices,

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which people see long term around $70 a
barrel,

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could remain above that for two or three
years just because of the need for people

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to build up stockpiles, etc.

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And it will take some time for full
production to resume.

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So we think the case for energy does.

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has improved.

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In a sense, it's brought forward what we
thought was a rebalancing happening over

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the next 12 months.

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In a sense, we've seen that happen almost
immediately.

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On the other side, we have in that fund,
we've lowered our, we were overweight

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pressure, so we're now slightly
underweight.

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And base and bulks metals were also
slightly underweight.

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The other areas we've increased is
fertilizer, which is majorly impacted by

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what's happened in the Gulf, particularly
nitrogen.

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And we've also increased our positioning
in aluminium because, again, around 7%

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of the world's supply is at threat at the
moment in the Gulf.

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George, thanks very much for your
analysis.

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George Cheveley is Portfolio Manager,
Natural Resources at 91 in London.

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The views and opinions expressed in these
podcasts are those of Lindsay Williams and

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various contributors and do not reflect
the policy,

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position or opinion of any other agency,
organisation, employer or company

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associated.

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with strictlybusinesspodcast.com.

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Assumptions made on the analyses are not
reflective of the position of any other

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entity other than the speaker or the
author.

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And since we are critically thinking human
beings, these views are always subject to

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change, revision,

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and rethinking at any time.

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