Mike McGlone on Commodities, Gold, Silver, Oil, and the Market’s Next Big Move

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[00:00:08]I'm Michael Fox and this is the Prospector podcast and we're on location at the current trends in mining finance conference put on by the New York chapter, the SME in downtown Manhattan.

[00:00:20]And when I'm in downtown Manhattan, that means I get to talk to my good friend Mike Mcloone, who is the commodities expert at uh Bloomberg Intelligence. Welcome to the pod once again, Mike.

[00:00:32]>> Oh, thank you, Mike. It's good to be back. It reminds us a year ago doing this. And I guess prices have increased a bit.

[00:00:38]>> Uh a little bit. Uh yeah, we had a interesting off microphone that uh conversation that we are going to revisit here. But uh really before we get into all of this because the last time we spoke was uh probably in early March. the uh missiles had just started flying over in the Middle East and you know what was supposed to be a short and uh quick event is uh you know as these things are apt to do is uh um bogged down uh I don't see it ending anytime soon because you have two sides that uh think they've won so neither side is particularly interested in you know in negotiation here at this stage. But the conversation you and I had over breakfast this morning I found was really interesting because historically um you rely on charts and you know trotting what you think the commodities and such are going to end up doing and the conversation that we had started with a basic question which I'm going to ask you here is when you have a supply shock such as the straight of her moose closing down.

[00:01:57]As someone who's not a chartist, I look at that and go, "Okay, if I were, this is just thrown all my charts out the window. What do I do to deal with?"

[00:02:09]And you had a really interesting answer.

[00:02:12]So, I'm going to let you explain that.

[00:02:13]>> Well, I like to focus on everything that I think matters for the commodity markets that's not in the public, widely known domain. So, your average teenager knows what's happened. your average kid who doesn't care. Anybody who gets gas knows what happened. There was a war initiated by Mr. Trump. Um, so much for victory. Price of gasoline before this and the average price in the US was 280.

[00:02:32]Now it's almost 452 today. That's a major shocker. Um, and the key thing I like to focus on is there is major even our own teams in London. We have major solid models and teams who project price supply demand models all the time models all the time. And the key thing to always remember in commodities and the number one factor for price sometimes is or for supply and demand is price.

[00:02:56]Depends on on how it moves and when it moves. For instance, I was fundamentally and technically bullish gold forever from 2000 well almost forever but mostly starting in 2000 with the big the big print. 2021 2022 Russians invasion Ukraine 2023 every year it's going to go above 2000. Malone you're an idiot. It's not going above 2,000. Finally kick in.

[00:03:17]So that was more fundamental to me. And now it's it what gold did to me gave me some good signals that you're supposed to be selling when they're yelling. And that was kind of late last year when it first crossed um exponentially above 4,000 and certainly this year when it got to 5500 and most notably in silver.

[00:03:33]So what happens sometimes in markets is everybody knows the fundamentals.

[00:03:37]Everybody repeats the same thing often times. Certainly in a conference like this for instance when I presented yesterday I warned people ahead of time.

[00:03:44]You're used to me being bullish metals.

[00:03:46]Most notably, I was a commodity guy at Bloomberg. I created the all metals index. I mean, I asked index team, but why? Because that's the best place to invest. And I pointed out we've went up too much. Elasticity is going to kick in. This is a problem. If you've been bullish forever like me, now is not the time to be bullish. So, I'll give you example of gold. Gold volatility, 180day volatility typically runs well below the S&P 500. It's a store value. Right now, it's 2.3 times S&P 500. That's the highest since 2006. It gave you warnings back then. And typically also at the same time you look at silver volatility.

[00:04:19]I just look at for signals that are going to tell me what's the right thing to do. Silver volatility around almost 80%. I can use 180 days. Five times the S&P 500. That's the most I think you have to go back to 1980. So silver got markets just got way too expensive. Why they did it? I'm less concerned because it went the right way. What I was looking for. Now it's like okay signal is you're supposed to get out. Not so much get out. expect a elongated period of poor performance after this exceptional breakout and everybody will point out all the things like the printing of money, dd dollararization, all that. Yeah, I get it. Things we wrote about five years ago. Now markets price forward and the key theme is we have never had such extreme volatility in gold and crude oil without it trickling up the stock market. And that's the wonderful thing about this year that I've been number one wrong on so far. Number one, I was wrong about the closure of straighta hormones. I figured our esteemed um defense department military is much would have planned well for this and would at least make sure one thing did not happen. The closure of the straight home failure that did not happen. So when people say when Trump says he won your average person in this country is looking around and say sorry sir but everything you promised me has not happened. I'm paying much more food and energy and gasoline everything than I did before this war.

[00:05:36]That's a failure to us. And so what's happening now is so much macro in in politicals. Crude oil is starting to break stuff globally which is a pressure factor in copper although copper made a new high. And what's pulling copper along? The stock market. If the stock market goes down, the metals have a big problem. And that's the key thing I'm pointing out right now. There's I'll end with this. There's two key themes that's kicked in in commodities. The only major we're all hearing about energy, right?

[00:06:02]Crude oil. The only major sector that's made a new high this year is precious metals. Now I'm using Bloomberg industrial um precious metals index.

[00:06:09]Even the industrial metals index even though copper made a new high that whole index which uses nickel and and aluminum um lead and zinc has not broke above 20202 high. So maybe it will. But that's the key point is precious metals and they got too high. Key thing I'll end with the Bloomberg energy index all spot prices of energy which is crude oil, gasoline, natural gas, it's the same price right now as 2005.

[00:06:33]So that's what's happening. And also we're hitting this global situation because of of of I think the most wonderful thing is the stock market has n down. That's the number one thing I got wrong. The stock market volatility will pick up. So far I'm wrong in that.

[00:06:47]But to me that's a key thing we'll probably get to and we'll see how we'll discuss that next year. I think by then this year stock market volatility will go up which means almost every commodity being not crude oil almost every commodity most noted metals will go down including gold. That's what's different.

[00:07:02]>> Yeah. No, it's it's a matter of just shifting your focus from I guess one set of charts to okay, this has happened.

[00:07:12]What do we go back to when something similar to this has occurred? And then shifting shifting the charts. Like even when you talk about uh it not necessarily be good for precious metals, you're not talking about it going back to the $2,000 level.

[00:07:30]You're you're saying that it's, you know, it's going to be more of a stagnation period where it's going to trade within a range, but it's it's not going to take a big volatile run upwards.

[00:07:40]>> It could. So, I think we're in a point now, it's a it's a trader market in precious metals, most notably gold and silver, meaning we could make a new high around gold, get $6,000 an ounce. I hate to see what might make that happen. We could make a new high in silver, maybe get to 120, 130, but I think that's going to be selling opportunities. And then I think we're potentially be stuck in ranges for a decade. Crude oil is a good example. It made its high in 2008 and it's been stuck in that range for 20 years. That in that period is when it's got its highest ever versus a 60-month moving average. Now that's just one metric. I use volatility. I use 60-month moving averages in gold and silver. They reached the highest in almost four decades. But also what happened right now is gold is basically the highest versus a basket of US treasuries since 1982. Even a long bond versus um gold is like the lowest. Treasuries are so low in terms of actual price um what they return versus gold. So gold reached some major extremes. Silver in Q1 reached the highest ever versus copper and the highest ever versus crude oil. Now we've seen a little reversion there, but so I expect overall in gold is maybe get to 6,000, but it can easily revert back near 3,000. 3500 is a key level and stay within that range and trade within that range for decades. So right away and what's going to happen is everybody's going to get bullish on the peak. It's going to look really bad in the bottoms and it's going to trade around the range. That's what crude oil is doing right now. Everybody's bullish near the highs. I'm like, yeah, what's going to do? It's just going to enhance that massive surplus of supply and demand from US and Canada. Silver same thing.

[00:09:09]It could get a new high. But I think if you look at a normal reversion in history when we've had this kind of exponential runs and the big difference from history is silver back then was money and considered somewhat precious.

[00:09:20]Now it's industrial. Industrial means you got to have demand from China which is a problem for um copper and then I look over what's happened in Chinese bond yields 1.76 and a 10ear note that still shows deflationary forces so I think silver can easily trade down to 50 is key support even 30 it's like a 60-month moving average usually how it works and trade within a range forever but buying and holding these precious metals was a thing you were supposed to have done for the last 10 20 years and having lightning up and still being able light is typically what the right thing is to do the bottom line though is I mentioned Michael's right now 80-day volatility on gold is 2.3 times the S&P 500. That means it has shifted to a highly speculative asset from a store value and it still is. So if stock market goes down, gold goes down. Stock market goes up, gold goes up. To me, that's the shift for now that I expected out to trade.

[00:10:06]>> Okay, because that was going to be the the next question I asked. So given given that, does gold have to go down or does stock market have to go up to correct that back into trading or is it a combination of both? Well, that's the unique thing about everything I look at now. Even my my metals colleague in London, Grant Spor, he's from South Africa. I mean, he's from he spent a lot of time in the mines, mostly fundamental. He pointed out recently part of the reason COPR has made new highs is because the Korean Cosby has made new highs and that's a lot of AI demand because it's very sensitive to economics glo globally and sensitive to stock markets, but it's way lagging like copper for example is way lagging. most of I I like to overlay it with the S&P 500. If you take the per pound price of copper and divide by the S&P 500, just take three zeros off it, it was the same price for 10 years and then S&P 500 takes off and copper's been lagging for a while. So, what I'm worried about in all metals is I've never seen this in almost all my markets I've looked at.

[00:11:05]Such a inordinate burden for stock market to keep going up for markets not to go down and the key markets. The key markets are number one metals, the broad metals index. I like I mentioned we I asked the index team to create the Bloomberg all metals index. This was launched almost a decade ago. It's almost completely depending that stock market going up and that this included gold includes gold. I also asked them to create the Bloomberg Galaxy crypto index. Now Galaxy helped us initially it was Bloomberg but it was kind of my idea. It doesn't matter whose idea but it was and that index is way underperforming S&P 500 and that index is completely dependent on the stock market going up in Bitcoin digital gold.

[00:11:40]So this is where we are now. stock market cap to GDP around 2.5 times is the highest on a year in basis in a 100 years. And here's the key thing that's so unique about it, Michael. It's so political. Our esteemed party in power needs some key things for midterms which happen in November and they are getting crushed in the polls because they're doing the wrong things. Number one, they think is they need crude oil to go lower, which would probably be good for stock market if that happens. And they have a way to do that. Just ban exports or something or open up the straight.

[00:12:09]They need interest rates to go lower, need energy prices to go go lower and need the stock market to go higher. So energy prices going lower. I fully expect for instance in the macro, you look at the December WTI crude oil future, the front is around 108 as we speak on May 19th. But that December contract, which will be front right before Mr. Trump gets elected, he needs that closer to 50. Imagine if it goes higher, gets to 100, Republicans are going to get toast. Imagine if it stays higher and even if the stock market goes down, the next president will almost guaranteed be Democrat. It's just how we are now because stock market is the economy. They know it and they know there's a problem. And so that's how we've all resorted that way. And that's why there's sometimes in your life supposed to say thank you and not be involved. But as a strategist, as a commodity strategist, I I tell people if you're a bullish copper, you better keep an eye on that S&P 500 because your copper um position and that price of copper is very unlikely to go up if stocks go down. And if stocks drop 10 20%, copper is going to drop 20 or 30 or 40%. It's just the way markets work. But the all the medals are that way and it's just a unique thing about where we are at this point. So may you live in interesting times.

[00:13:13]>> Yes, most definitely. Now the straight of moose creates problems uh for lack of a better way of looking at it because there's two things that are occurring that are headline grabbing. Uh one more so than the other, but the the first one is the oil prices.

[00:13:32]oil prices are up because 20% of the oil can't get through the straight of her moose and into the marketplace. The other thing that is starting to gather some headlines now but is not necessarily as as pertinent as the oil prices is is fertilizer that's trapped on the other side of the other side of the straight.

[00:13:53]>> And you and I talked about that. It's probably a more of a problem for next year than it is for this year, but it is a problem. So let's let's operate on the assumption that the straight of Hermoose is going to continue to remain closed for the foreseeable future and you maintain higher oil prices and higher food prices because of the lack of fertilizer.

[00:14:17]Those are really bad key ingredients in inflation that could push everything into a major recession. And when we have a major recession, those stock prices are not going to go up. um what's the risk that we're looking at for that to actually happen and unravel the whole thing?

[00:14:37]>> That's the one thing that's been missing so far in my major call. I still expect this pump in crude oil. The high this year is 120. The high in 2002 222 was 130. The high in 2008 was 147. You see the lower high factor. I still expect crude oil to go towards 40 with one key catalyst. When you pump prices like this, it's going to incentivize this massive surplus of supply and demand for the US and Canada, which is around 8 million barrels a day. Ice is going to go to 10. There's nothing to stop that when prices go that high. But the number one thing that hasn't stop hasn't happened that typically makes all commodities, most notably industrial commodity like crude oil drop and bottom is a drop in the stock market, wealth reversion. Now, we haven't had that, but we're so overdue. That's why I'm so scared by the signals from things like gold. like you over that gold volatility hit 2.5 times um S&P 500 uh and crude oil volatility just five times almost S&P 500 that's just never happened without stock market volatility picking up so that's the key theme the straightmore hormous stayain close is this one key thing we have to be careful about is where we live US Canada I'm obviously from the corn belt but that's the main way to measure corn all the decisions for inhydrris which is the main source of fertilizer is usually comes from and hydrris The number one source I got to remember and point out of hydrris in the US and somewhat candid more pesh is natural gas and US natural gas prices kind of did what it did in 2022. It popped up and then collapsed.

[00:16:03]It led the way lower. So right now US natural gas prices on a year-over-year basis are down about 20%. Now that's a front future. It'll be high for for January of course but in uh in January it was up 100%. It was a pump then dump and it led the way. The key thing to remember is a major surplus of natural gas US and Canada which means I'm not so worried but be careful of those key um themes that are kind of like helps people get hits in media um that I absorb all the time and that is yes you everybody's using that same narrative 20% of the world's crude oil supply but let's not remember forget us um not so much human um in uh in invention when it comes to necessity and there's a plot of incentive in necessity For instance, UAE has just left OPEC. They can get their a lot of their oil building pipelines to get it out through the Gulf of Oman.

[00:16:54]Saudi Arabia is already getting a good portion of their crude oil out through pipelines to the Red Sea. And they're making more money than they did before even though we're exporting less because prices are higher. So that's the key thing to remember. But the bottom line for everything, if and or I should say when the US stock market starts reverting some of this excessive valuation, which I've been wrong on forever, that's going to be all that matters. And right now that's not happening. But when that happens, it's the most severe deflationary forces from wealth accumulation, wealth reversion in almost 100 years. And it's not just stock market, it's housing and private equity and so many things. It just we're so pumped up. And what you mentioned is a key thing almost a guaranteed way for party in power not to get elected is pumping up inflation. This whole narrative of running it hot. I look over to the theme when I hear people say they're running it hot. And I look over to the Republicans and Trump and say, "Do you want to guarantee you're gonna get hammer in those election? Run it hot. Keep that inflation high." 55% of people in this country are wage earners.

[00:17:54]Those are the ones who voted. The rich people, the top 20% that are benefiting from, you know, all this kind of crony capitalism and stock market going up.

[00:18:02]They don't vote for you. And and the people who kind of the average people are just getting pissed off. I see it.

[00:18:08]I'm going out to the heartland again next week. So to me and also that's why it's so important now I think the macro is so important. It's almost a guarantee in this country that the next president will be a Democrat if the stock market doesn't keep going up because if it drops that's almost a clear recession.

[00:18:22]Now that'll get lower prices but the key thing to remember is postinflation deflation 2008 I was took a while I was quite wrong in that. I was calling for similar things in 2006 because volatility dropped so low. It always went up. It's done the same thing this year. But what happened?

[00:18:37]Remember crude oil popped the 147. We're in the great recession. The Fed was already easing. CPI peaked at 5.6%.

[00:18:44]And then it dropped down to 32 crude oil by the end of the year. Obviously, the stock market dropped. We had collapse and problems. And next year, 2009, CPI bottomed at minus 2%. I see a mirror. I think we're going to do that this year.

[00:18:56]And that's one key thing that'll make me wrong is stock market volatility staying low despite all this stuff happening in the world and pumping in crude oil and pumping in gold and keeping inflation high. You see how we've reached an endgame? The Fed can't ease. Inflation's too high. A lot of the rest of the world's tightening despite the fact that we see, you know, recessionary trajectories and, you know, people are have to curtail their everything because of energy costs. And this is really hurting the rest of the world, but us too. It's just this is a unique situation where I think it's one of those years. I'll I'll reiterate what I said at the beginning of the year. It's the base case for me this year is one of the best positions I think will be just to hang out in US treasuries and pick your spots. So far, I've been wrong. Um, but similar thing I had last year was the only place to be I really thought was gold and precious metals and it took a little while. Got little got lucky in that one. But when you do that, when you pump up like this, markets are just such a tremendous I think opportunity for um people to say um thank you very much for all those wonderful returns. Get out and wait for an opportunity to reset risk assets. And by the way, unfortunately gold is now a risk asset. Okay, let's one last question about the oil market and then we'll we'll move over to to the precious metals. Although we dabble in the precious metals cuz they built a feature everywhere, but missiles have been flying in both directions over the Middle East. A lot of infrastructure has been taken out.

[00:20:20]And if you believe the headlines and the stories that you you hear, in some cases, some of these facilities are going to be down for 5 to seven years.

[00:20:30]Others are going to be, you know, 8 to 12, 8 to 14 months and things of that nature. So, pre-war you were projecting oil prices to drop to a uh 40 $40 to $50 level, >> low price cure, >> the low price cure.

[00:20:48]Given that this supply may be offline for a longer period of time than what we would anticipate, when you talk about oil correcting, are you still talking about $40, $50 >> and not a higher price because of uh offline demand?

[00:21:04]>> So, one thing that's most um strategists and models miss is rapidly invention technology, necessity invention, particularly when prices pump. So, let's look at the bottom line. What's happened to crude oil for the last 20 years? It's bottomed at 40 or below three times and it's peaked at a lower high every time.

[00:21:23]Here we got another peak of 120. The previous is 130. Before that was 147.

[00:21:27]Why is that? Because of the transmogrification what's happening in our countries most notably US. 2008 when it peaked the US was the net largest net importer on the planet 12 million barrels a day. Now crude oil and liquid fuels total supply versus demand surplus with US and Canada. All that Canada a lot of that Canadian oil comes down through the Gulf is 8 million barrels a day. It's going to 10. So price maker status in just 20 years, a little bit less, has shifted from the Middle East to the US, not so much Western Hemisphere, Canada. Argentina and what did we just get? We got a pump in price at double the average cost of production. We all know what happens in commodities with cost of production. You always get that cost of production. But the bottom line for my call to be right.

[00:22:06]They might have to fill or kill it this year is the stock market going down.

[00:22:10]It's a call for everything. And all that will take, Mike, is just a little bit of normalization of volatility. So here's the lesson I've been using this volatility right now in the stock market 180day volatility S&P 500 is basically the same as it was the year before and year before that and the year end basis that's hike never happened 12% or so and when you look at volatility in gold it's triple that almost triple that in crude oil it's five times that we've never had stock market volatility staying that low so obviously in an option trader I'm always looking for leading indicators so my base case is that volatility will pick up this year stock market will go down and that means everything goes down and most notably crude But that's what happened in 2008. Remember the crude oil pumped and then made everything trickle down and then it dumped. It's the pump after the dump. Now we've had a pump then dump in in so far this year.

[00:22:55]Natural gas pump and then dump. And what did we do? We brought on a we have a very motivated parties in power that need energy prices lower and said just drill at will. That includes natural gas. We've had a pump and dump in silver. Was up by 30% or so at the beginning of the year. Now it's roughly unchanged. Gold silver was up 60% to the peak. Now we've had that dump. We've had a pump then dump in gold. It's hovering almost down in the year 5%. It was up 25% year. All this stuff to not continue dumping needs that stock market to go up. That's why I look at this as one of the best trading environments ever. Not buy and hold and you sit back and just wait for opportunity. So that's my key theme is the higher the crude oil price is the harder it's going to fall. This is how the lessons of history are. The thing is we were towards a low price cure and we were incomplete. So I do love the like the estimates from the um IEA. They pointed out well before you know in March and I'm sorry February how massive supply surplus and you know they weren't making estimates and of course completely flipped. Now we've had a good reason to do that but we use crude oil and that's crude oil every day. The key theme I want to remember and point out and end with is I loved in 2022 when people calling for 150 at crude I broke wrote wrote my Adam Smith the wealth of nations and my um mouthus um Thomas Mouthys um and pointed out the invisible hand is stronger and that force of elasticity and commodities is stronger than ever. So why is the price of corn it's about five bucks but the low for the last few years has been four the same price as 1974 because we can we double the production on one acre land in the corn belt I used to own a farm in in just 50 years. Um why is the price of crude oil right now the same as it was in 2007. We don't use it much but what it did when we did the Russians invasion in Ukraine accelerated a pre-existing trend which is what I love to point out is that's technology replacing fossil fuels. Now 60% of vehicle sales in China are EVs and those EVs are off. Awesome.

[00:24:49]China's picked up I'm sorry, Canada's picked up on it. But in this country, the fact that we have 100% tariffs on these awesome cheap vehicles from from um China should be a warning to US, Japanese, Chinese um internal combustion manufacturers. Hey, you're making buggies. The rest of the world's moving forward. And so a lot of countries are getting hurt. They're they're pushing back on some of those tariffs, but not the rest of the world. I mean, I talked to my colleagues in Singapore and Mexico City and even in London. They're waving them in. It's just better technology.

[00:25:18]But that's what happens. I think that's what people are going to realize when we look back from the future is this pump in energy prices is going to accelerate what started what accelerated 2022 with and now it's it's the deflationary forces being exported from China. EVs, renewables, solars, batteries. The energy density of batteries is a complete bull market. Now, yes, I've been called a dreamer. I am. But these things, these kind of events accelerate those pre-existing trends which make commodities go lower. And it's one thing that great Canadian Jeff Booth points out is technology is a significant deflationary force.

[00:25:52]>> Always is. Let's talk about Mike Mclo the dreamer.

[00:25:57]>> There we go. A year ago, we were sitting here, not in this particular room, but we were sitting in a room here in this these law offices where this conference is held. And uh we were giving the Mike Mclo victory lap because you had been projecting $3,000 gold for an awful long time. And it finally hit 3,000 gold shortly before we got here in the spring. And you got to say, "Yes, I was right." and we did a victory lap. Since the year it got as high as 5,500 and it's fallen back and and corrected as it as it would, but um a you're still vindicated, but when you talk about the gold markets, did you see 55 coming as fast as the 3000?

[00:26:45]>> It's best sometimes for certainly for someone like me to admit where you're wrong and mistakes and move on. Did not see that. But what happened last year to me is still the shocker. I can't wait to write about it. my book sometime it warned us when gold rallied was that 70% it was the greatest acceleration since 1979 in an annual basis and nothing else was like happening and then silver caught up and took off and it pulled up all the metals that was a warning something's going on to me it would pre it was a it preempted the war the Russia the uh you know Mr. Trump's invasion of of um Iran that so far has failed in some ways. I mean trades closed and prices have pumped, but gold was a front runner and it warned us. But the key theme that it warned me about is how I I my tea leaves tell me is that the stock market is going to go down. The volatility will pick up. That has not happened yet. I've been wrong forever.

[00:27:38]But that to me is still the year's not over. But that is a key thing is the key things I got wrong so far so so far is straight being close and that volatility hasn't trickled up but gold warned us the theme is though when you have are lucky enough to be overweight long in a position or as a strategist to be pounding on gold going up for years and years there it's going to go above 200 I just so here's what I quote 2024 I broke out my history books I had a quote Roger Bapson who's a you know famous speculator and industrialist who started Bapsson College in Boston I just repeated his quote from 1929 in the opposite way in terms of gold.

[00:28:12]His quote was, "I will tell you what I told you last year and the year before.

[00:28:15]The stock market is expensive. It's going to go down." I just repeated that same quote in my outlook at the beginning of 2024. I will tell you what I told you last year and the year before. Gold is going to go up. It finally did, but now it went up too much and you get the speculators jump on and you're supposed to just as a prudent investor lighten up. And I always remember that me people hear Jim Simons, you know, the famous quant speculator. I remember him told telling the story about his team. their bullish gold. I think this was for the big 70s and late '7s 80s rally. He had one guy in the desk who would not sell. He finally convinced them to sell. Well, that high lasted for until 2008. That can happen.

[00:28:51]But everybody will point out the fundamentals that are pre-existing debasment everything. It just sometimes price runs ahead and gives you opportunities. So now what am I looking forward to? The key theme to me is if we get through this year with the stock market volley staying low, it'd be almost a historic oxymoron.

[00:29:08]Um I think what's going to happen in the straight is Mr. Trump will cave and have to figure it out somehow. So far the inability of the US um military to curtail the offensive capabilities of Iran to close the straight mute hormuz is a factual failure. Whatever you say that's a failure that should have happened. We should have been able to say sorry we're going to pound you hard enough that you have no offensive capability. So, as far as a destroyed navy, if their navy is destroyed, how come the straight's closed? That's the problem. So, I look at that as he'll figure that out. That'll get open up.

[00:29:42]Crude oil will collapse, go back down to 40 or 50 and maybe 60, but for it to get to 40, all you need is a normal imagine this 20% back up in the stock market is almost 50% of GDP. What's that going to do for wealth reversion? That will shut off everything. Same thing happened 2008. The difference this time is one big mistake is the Fed started easing too early. And what's happened? Well, they're part of the reason we got inflation. They're helping add fuel to a a fire, which has never been a good idea. How's that going to work out? Gold to me figured that out.

[00:30:14]>> Yeah, I wouldn't disagree. So, when we talk about the floors now for gold and silver, because we've shifted into Never Neverland as far as, you know, where they went, where where are those where are those floors?

[00:30:26]>> I like how you Well, so we start with gold. Most people are looking at three at 4,000. I have to admit one of the best technical signals I ever had when I see something or I hear something fundamental or technical I write about it constantly but it last year maybe late in the year right after this conference it bumped up against that 3500 level for four or five months it was one of the best technical signals I ever saw I love to watch the candles candles and then broke out so that's the first reversion target got to get below three 4,000 160day moving averages are running around 3,000 or actually below that but that's a key level most people are going to look at 4,000 and I Mike I'd love to see it get above 6,000. I think that'll be short. Same with silver. The obvious reversion level for silver is 50. Everybody gets at the old highs from 1980 2011. But if you look at normal reversion when silver's gone this far and this fast in in the past, it'll go back to 30 and make it as hard as possible for people for people to deal.

[00:31:22]So I look at as a great trading environment. If I'm a trader, I'm range trading and every time I hear or see or feel extremes, you do the opposite. It's not that hard to say, but crude oil has been doing that for 20 years. The difference is crude oil is being replaced. But that's why I have to put silver in a similar bucket now. Okay, I get it for solar and everything, but what's the term you're going to hear a lot of is called thrifting. Soon as the price goes up, people who demand it find alternatives. And the difference with things like gold and silver, supply can come out out of my mother-in-law's underwear drawer.

[00:31:52]>> Yeah. No, it can't. The one thing that surprised me last year, and the biggest surprise that I had was how silver got to where it got, right?

[00:32:01]>> Um, did I expect it to get to $7580?

[00:32:07]Yeah. Like your 3,000 gold, I was calling for that for quite a while and I did a little victory lap just like you did. But what surprised me is I thought it would act like gold where gold had its resistance at 3 or at 2000 at where the high was where silver's high would have been around the $50 mark. Gold bounced off that $2,000 high several times before it broke through.

[00:32:34]>> I was shocked that there it just blasted through the resistance and took off the way that it did.

[00:32:41]Given that, what particularly did silver tell us that maybe gold didn't?

[00:32:49]>> When it reached an all-time high versus copper in crude oil. Now, obviously crude oil, that was a quick reversion.

[00:32:54]That was basically January, February, it told me it was just a massive speculative rally and the shorts got stopped out and the the gamma guys are in. It was just too extreme. It's just how it always works in markets. Having been in markets a long time, I don't even care so much why it's doing it, but it happened. And so what that does is when it goes up too much, it usually puts an enduring peaks. Now it's not a Hunt brothers of trying to corner the market, but I'm sure there might we might read stories later about it. And then everybody punched to the fundamentals. Sure, it's a great fundamental story, but that fundamental story hadn't changed in five years. It was the same finally prices went up.

[00:33:29]That's the key thing though in commodities is certainly with the exception of the most elastic commodity in history is gold, but it's not. It's a store of value. Everything else is commodity. The lesson is autocorrelation. Simplistic world is um term is it goes down because it went up and goes up when it goes down it just went up too much >> and so it sh but that's the key thing I love when people point out the fundamentals you have to have a supply demand model and on the left axis that is price when prices shift parabolically like that it shifts supply and demand it and typically puts in during peaks. It's just measuring is more difficult. But I I'll end with this. In January and February, I spoke to people I hadn't spoke to for decades. And a lot of whom, you know, all kind of I wouldn't say bugs, but I'm a commodity guy. We all love the precious metals. The only ones you can really hold over time is precious metals. And some of them have said, "I just can't sell my gold." I'm like, "Well, sorry." And I'm just saying sometimes you just got to say, "Thank you very much and hope it's an overweight in your portfolio and you get out." And I think the thing is now it's going to just like I said, it's it here's the key thing we discussed.

[00:34:29]Imagine if the gold does goes to $10,000 an ounce. What does that mean for everything? The economy, the Fed, the stock market. That's a scary situation.

[00:34:37]So maybe as insurance, yeah, you have some, but >> as an investment, it's just expensive.

[00:34:42]>> I I've always likened it to I'm not sure that's the kind of world I want to live in.

[00:34:47]>> Exactly.

[00:34:48]>> But you have it as insurance. That's what commodities are. Yeah.

[00:34:51]>> And on a year-over-year basis, the Bloomer Commodity Index is up 40%. But I love to point out, I'm just publishing on it today, May 19th, there's only one sector made a new high, precious metals.

[00:35:02]>> Yeah. And that high is uh few months behind us now.

[00:35:06]>> And it could last for years.

[00:35:09]>> Yeah. If people want to continue to follow your uh mic, thanks for having me. I love catching up with you. Um I'm on the Bloomberg terminal on X Mike McGloone 11 and LinkedIn. Mike Mclo, senior commodity strategist, Bloomberg Intelligence. And if people want, reach out, ask me either to I can I'm happy to add people to my distribution list like you are. And you know, for now it's free. Someday if I'm not at Bloomberg, I don't know what happened, but for now it's good, but I'm happy to put them on my list.

[00:35:37]>> And I'm going to add one thing to that.

[00:35:39]Uh I believe uh you're going to appear remotely through a through a giant screen uh at a critical medals conference coming up in Colona on uh June the 22nd and 23rd. So, if uh people are uh in the Colona area and they want to hear Mike uh speak uh semilive, probably a good opportunity for them to do so.

[00:36:02]>> I'm looking forward to that. And it's one of those things I'd love to be there in person, but sometimes it's just a little too much to to travel all these places.

[00:36:08]>> Yeah. No, but uh I know the organizer of that is uh very happy to have you uh contribute in the way that you're able to contribute. So, I thank you very much for your time today and uh look forward to us uh having more of these conversations. As the Chinese say, may we live in interesting times. There you go.

[00:36:31]The Prospector News podcast is for educational purposes only. The opinions expressed are those of the participants and are not to be taken as investment advice. Listeners need to do their own due diligence and seek advice of a licensed investment advisor.