Copper & Gold: Pricing the physical vs the narrative with Grant Sporre (Episode 300!)

Welcome to the HC Comortis Podcast, a podcast dedicated to the Comortis sector and the people within it. I'm your host Paul Chapman. This podcast is produced by HC Group, a global search firm dedicated to the Comortis sector. Today we're taking two metals, one an industrial metal copper and the other gold traditionally a store of value. Trying to use their price journey to understand what is physical supply and demand and what is investor narrative. To give us some sense of both where these markets are at, what the future might hold and where the world is at. Our guest is Grant Spora, a commodities and equities analyst at Bloomberg Intelligence. He has a long career in commodities both on the sell side for banks as well as in operational roles in mining. This is part one, part two will be recorded live in Geneva on April 22nd for an HC Comortis Podcast live event hosted by Bloomberg Intelligence. I can put links in the show notes or their seats are in via Tony and very limited. As always you can really support the show by leaving us a positive review on the platform you're listening on. And as always I hope you enjoy the episode. Grant welcome to the show. Thank you very much Paul. Yeah, looking forward to a good discussion. Yeah, so this is part one we are meeting in person and part of a panel for Bloomberg Intelligence in Geneva on the 22nd of April for an invite only live podcast event which is at a part two of this discussion. Both of which are trying to take two emblematic metals, one gold, one copper, one very much a store of value, the other very much at the centre of the energy transition and trying to do a bit of your high school compare and contrast. And I think what we're doing today is very much sort of digging into the physical supply chains of both and then trying to come to some understanding of how they price and then start that discussion of where we're seeing some similarities. And obviously this is the role of these metals as an asset class in and of themselves and sort of really pricing the physical against the narrative. So you've kind of got your work cut out but you are the right man to do the job. And bearing in mind we're recording this, we're recording this sometime mid March, March 24th to put a pin in it. And so go out I don't know in a week or two. So prices might be double triple or half what they are today but we're trying to lean away from the immediate to the sort of the broader conversation. So that's just a caveat. Long intro my apologies. Let's start with with copper. Can you set up the physical supply chain for us in copper? Can you just get us all on the same page where how it's mined and how it's processed and what are the sort of the tradable units? Sure in its basic form it's got a very very simple supply chain. So we start off let's say we start off with a mining in Chile and you get two types of copper you can get oxide and sulfide sulfide. You have to process it gets processed into a concentrate which is effectively a grey powder off it's called a 30% copper content which then gets shipped mostly to China and gets firstly smelted into what's called an anode which is around 99% pure copper and then it gets refined into 99.9% copper which is your first or which is also called a cathode and that's your first saleable product. That's what you can you can stick on to the the alamy as part of the stocks or the inventory. So that's the very simplistic route for the sulfide or the concentrate route. In the 80s solvent extraction electro-winning was developed so what this allowed you to do was essentially take low grade oxides which typically sit on top of the sulfide and you have to mine them anyway to get access to the sulfide and you stick it on you basically create this big heap and you pour sulfuric acid onto it and it leaches out all the copper oxide and directly on the mine you can produce cathode and that gets that gets sold as a as a saleable product. So there are effectively two routes at which copper is is is is made and globally it was at the height of the the SXEW revolution you I'd say it was about between 25 and 30% was of global production was directly through produced at the mines and that weighed on the price at the time this was in the 90s that is dwindled because as these oxide caps if you want have been mined out you know we've had to revert more to sulfide which is you know it has got a longer supply chain and relies much more on on China's smelting capacity and we're down to around about 15% oxide 85% sulfide globally. It's very simplistically that's your supply chain in copper. I feel like there's a sulfuric acid podcast in and of itself. Well tied up in that one. Totally I mean just as a slight aside I mean you know the country that is most exposed to sulfuric acid the sulfuric acid prices is the Congo so the DRC. No numbers vary so it's between somewhere between 40% depending on whose numbers you believe some you know as high as 70% is basically oxide or sulfuric acid based production. So they are very very dependent on imported sulfur so you don't really transport sulfuric acid. It's more sulfur and then you create the sulfuric acid. As they build more smelting capacity in the DRC when you smelt the concentrate and as your your all bodies mature which is kind of what's happening there now you will have a lot more domestic production but as of here right here right now that is a region that is short and is likely to struggle with the Iran war ongoing. Can you give us some sense of volumes and locations both for mining and processing you've obviously already mentioned that China has captured that bit much like it has other critical minute minerals and then I want to kind of come on to the sort of the tradable units and that sort of the downstream if I can use that phrase tray but can you just give us some sense of volumes and locations to start off with. Sure so yeah so refined copper demand and supply in 2025 was around about 27.5 27.8 million tons. Total copper demand and that includes direct use scrap is around about 9 probably 9 million tons higher than that so now we're starting to get to roughly around 36 million tons that's your total you know total copper demand globally. In terms of mine supply and look Chile is still the biggest producer and that accounts for around about 30% of mine supply and then Peru and China itself sort of our second and third with the DRC catching up very very quickly as well in terms of volumes so that's you know those are your sort of four biggest regions and account for roughly 45% of global supply. In terms of smelting and refining because the two tend to go hand in hand it's about 55% is China based so you know that's where your bulk of your smelting and refining capacity sets. Yeah and then from a trading perspective there are both concentrate traders as well as the cathode or fine traders when we talk about the price of copper on the enemy and you know it's going to whatever hundreds of thousands you know it's 10,000 right now you know what are we talking and kind of what are the how does the global trade happen what you know how does that piece figure in. In many instances you know the miners will supply into the will supply directly to the the sort of either the smelters if it's concentrate or the downstream metal bashes that will produce your wire rod or your cable or your foil which are then used in the downstream applications. So there's you know there's a good proportion of direct B2B business to business sales. But what the mining companies will do and indeed you know some of the smelters will do is they will they will often sell a proportion of their let's say their output to traders. Traders are typically more more aggressive and you know in terms of pricing and need to compete for for volumes and and by the way that's why a lot of you know your traders like Glencore Trafigura one captive supplies well so they are you know they can guarantee a certain volume and they're happy to bid for let's say they're the spot car goes at the margin if you like. So that's now the proportions I'm not you know it's rough rule of thumb it's somewhere between you know 10 at the very low end 20% at the sort of high end particularly when it comes to concentrate of the market is spot based the rest is pretty much contract based. So it's actually you know certainly in concentrate it's a spot market is a lot smaller than the overall market. Obviously that's the supply picture and just before we move on to demand it's one of the challenges here on the supply side is it takes quite a lot of time to go from new resource discovery or indeed known resource to exploitation, right? Can you just give us some sense of how long it would take to set up new sources of supply? Because that does play into this narrative piece that we're coming onto. Yeah, totally. The timeline or the project timeline for a mine, I mean, very optimistically, if everything goes to plan, you're lucky to get everything done from, let's say, from first discovery to first metal in sort of under 10 years. That would be an absolutely fantastic outcome if you've managed to do that. Typically, it's sort of 17 years is the average and I've seen other estimates over 20 years is kind of from first discovery to first metal. So I suppose it depends on, you know, it depends on where you want to sort of take your starting point from. When you first do the first drill hole or when you have your reserve and you have your resource and you've got a good idea of what is there and then you want to take it to let's say a bankable feasibility project. So there are a couple of sort of aspects you can't really rush. One is, typically you have drill campaigns, so you will have a whole series of drill leaks and you will drill a lot of holes in your all body. You'll take away the core samples going and analyze them, put them in a model and that'll give you some sense of what your all body looks like, scale and quality in terms of grade and let's say the geometry of the all body as well. Now, you know, the judgment you have to make as somebody who owns the project and wants to develop it is, do I have enough information, quality information to move to the next step and so obviously a risk decision and more often than not because these projects are so capital intensive, you know, we'll do another year of drill holes just to get our confidence levels up. So that's something that companies don't really like to rush. And then the next bottleneck is all the approvals and you know, often it's an environmental impact assessment which can be done very easily. Again, you can't rush it because often what will happen is let's say the authorities will come back and say okay, we need more data and then you have to wait typically a year to collect rainfall data, water, hydrology data, etc. And there's just no way you can rush it. So that's what takes the time to get you approval to actually mind the all body. Yeah and there's nothing ultimately is really changing on those approvals despite sort of lots of stated goals by governments. But let's talk about the demand. You've given us kind of the current state of demand that maybe I can kind of, you know, I think it's a pretty well-trot story in terms of energy transition, the electrification of everything and you know, aging and certainly in the west to store it so in the in the in the global south and developing nations it's obviously probably building more like to be building grids than building gas stations is some of the theory. And in the west it's even if there weren't a story of electrification, the smart modern grid technology requires upgrades across the board of existing grid infrastructure and wholesale replacement sort of those things last 50 years and everything's coming to it to the end of its lifespan. And copper so therefore has become emblematic of kind of the future world and then people line that up against that 17, you know, 10 year to 17 year average story and suddenly people start seeing a big gap and this is where you kind of get this, you know, we're starting to see this narrative. Can you just give us some sense of demand today and kind of where the reaching out where sort of the most conservative estimates are at and can that be met and then we can come onto that narrative bit. Yeah, so just to put it into context, I mean, and you know, it varies from let's say decade to decade but since the you know, the second end of the second world war and we had the reconstruction of Europe up to today, the average refined copper demand growth is around two and a half percent. So it's see, you know, in rough terms about.7 p there's a point. Yeah,.7 times GDP, that would be the multiplier. It's not quite one, it's not quite a half, it's somewhere in between, you know, as a sort of a very, very rough rule of thumb. So I suppose coming into let's say the end of the, you know, 2018, 2019, the narrative was, okay, China is maturing. So two and a half percent is not sustainable and, you know, copper demand growth is going to go through a decade or two of sub, you know, sub trend growth, sort of called it one and a half to two percent. So that was, that was quite a sort of, let's say, a negative, quite a bearish sort of view of the world. And then we got adoption of EVs and a lot of renewables which are a lot more copper intensive than let's say the old infrastructure, you know, internal combustion engines and fossil fuels. And then the debate became, okay, well, what's what's the growth going to be? Is it going to be around, you know, is it going to be three and a half percent? Is that going to be the trend growth for the, you know, the 2010s and into the 20, sorry, the 2020s and into the 2030s or how are we going to, you know, how's this going to shake out? So, and, you know, my, my sort of slight, my sort of overarching thesis will be that you are going to get some maturing of China's demand and that has been the growth engine for the last two decades. And that is going to slow. So if that slows to around one and a half percent and we have electrification which, which goes on top of that, yes, potentially it's, you, you get slightly higher than trend. So you get two and a half to three percent demand growth. Now the reality is over the last, let's say, you know, since we had the recovery from COVID, demand is, or a fine demand has actually been growing at around three percent. So again, higher than trend and, you know, last year was actually a particularly strong year and, you know, all the numbers that I can sort of triangulate is it's a real demand was growing at about four percent. So that's a very, very strong number. Given the backdrop, especially last year, we had a lot of the tariff uncertainty, which, you know, one would have thought would actually hit the demand and it, it, it, it, it, it didn't really. So now, I mean, going forward, obviously we've got a lot, lot more disruptive forces in the world and we did see China slowing quite dramatically towards the end of the year. So, you know, my, my sort of forecast is that for the next two years, we probably see growth to two to two and a half percent demand growth. Okay. And that's actually not particularly bad. So even in an environment where, you know, I'm a little bit more cautious on the outlook for copper demand growth, I'm still roughly at what just slightly below trend and a contrast that with, with mine supply, which has been struggling to grow at that rate. I think last year it grew around about one percent and probably is going to grow less than one percent this year. So, you know, the mine, the, you know, even in a, in a relatively cautious environment, mine supply is struggling to keep up. Yeah. Is there, as you sort of map out that sort of somewhere between 2.5 percent, you know, for being that very aggressive number, is there a percentage growth? And I recognise this is sort of a two-sided equation, there's also of, of the GDP and GDP might slow significantly what's going on around the world with a global recession. Is there a number, is there a percentage at which sort of it's kind of panic stations? Because and perhaps you could weave into this, you know, how elastic copper demand is, you know, and what percentage growth you really start to see a sort of a 10-year delta growth, you know, massive gap between what even the most optimistic mining forecast and recycling forecast could achieve? If you're going into a recession, then demand typically contracts and it'll contract, you know, 5-6 percent, so quite dramatically. Because it's always difficult to really tease out the difference between a real demand and a parent demand. So there's a compounding effect when you, when you have a recession or a dramatic slowdown is the people destock. So your actual demand number looks worse than it actually is. But again, you know, from, you know, trying to dig through the numbers, it's not very easy to, okay, what's destocking and what's actually a decline in real demand. You can make some good good guesses, but to get, you know, exactly right is quite challenging. The way, the work that we've done, I've done previously was actually looking at industrial production and if industrial production slips below 2 percent, typically that's when we start to see copper demand struggle to stay in positive terrestrial. So anything below 2 percent industrial production, that's when, when, when copper struggles. So that's the number that I would, I would would keep an eye on. It's not, it's a bit difficult, it's not as widely reported as GDP. And if you have to go on to the, let's say the Bloomberg terminal, there's no consensus number for IP, it's all GDP. But that's, you know, getting slightly closer to the action if you use industrial production. The energy and resources sector is experiencing unprecedented change. 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And obviously there's been this narrative building around it and we're going to come onto what that's meant for sort of the fast money, you know, you know, asset managers coming into the space with that narrative in mind. But can you just give us some sense of kind of is, is, is mine is supply growth? What point does supply growth really start to give everyone a real concern? Or alternatively when copper demand, let's say is it 5%, does that suddenly we're in a new realm of what copper could cost? Yeah, totally. So on the flip side, I mean, this is, and you just left a look at the price action that we saw last year. So there was a, you know, series of three fairly big mine disruptions, the last one being grassberg. And that was really the catalyst that sort of boosted the copper price to well above $10,000 a ton. So, you know, so on the supply side, that's, you know, it's the supply shock that drove it, but against a backdrop of pretty robust demand. So, you know, I've seen where we have supply shocks against a very anemic demand environment, you know, sort of, let's say zero to 1%, and the market has totally ignored that. So that, you know, it is against the, you've got to look at those two factors in conjunction. But certainly if we get to sort of consistently, so we've had two years, you know, 2024 was 3.5%, 2025 is 4%. And I think, you know, we saw that rally in copper towards the end of last year, but what that precipitated was a bit of a bribe by a strike, particularly out of China. And we saw a lot of hidden stocks make their way to the alamee. So, you know, all the hidden stocks became visible again. And part of it, I think, is, you know, effectively produced or downstream produces, saying, look, we're just not prepared to pay that amount of copper. So there is a feedback loop, and we have seen some demand, you know, I'm reluctant to use the word demand destruction because you're right, it is elastic, and ultimately buyers will have to come back to the market because, you know, great plans are going to get executed. Renewable build out is going to, it will be executed because it's typically government driven, particularly in China. We will see some, some, some, let's say, some elasticity of demand will be in vehicles, will be in sort of air conditioners, things like that. So the consumer end of the market. But again, it's not, you know, the actual copper price or the actual copper value in these downstream items isn't, you know, isn't particularly owner. So it's got to be particularly high and really impact the price, along with a lot of other factors before we start to see demand destruction. So I think there is a certain resilience, but you know, there's no doubt that if we have a recession and GDP contracts, you know, certainly, you know, my experience is that copper demand contracts as well. And that we can't get away from our own thing. No, no, but let me, I'll ask sort of the final question here because this is sort of weaving in that kind of pricing the physical where we focused on and then kind of this narrative piece. One of the, one of the interesting factors is of course, at the beginning of this year, copper going to an all time high, huge demand from a, you know, security of supply or, you know, critical mineral piece and the energy transition and all that good stuff, irrespective of a concerns over China's economy. To Iran war starts and copper prices, you know, drop precipitantly and same as gold and almost identically as gold. And suddenly that introduces the narrative that can, you know, this isn't about sort of industrial, you know, this isn't, and well, let me raise my question correctly. Is that, that would seem to me more of a story of a flight to safety, asset managers getting out of that narrative than necessarily concerns over worldwide recession. And I guess that introduces this idea of trying to tease apart what is kind of the, how much as copper being affected and price to global money flows, buying into that energy transition narrative and the AI story that sort of, you know, more predominant. Yeah, it's a massive question. I do. Yeah, no, it's a big question. But, but totally, you just have to look at the price of it, all metals at the end of last year. So from about August, we saw, you know, big rallying gold, big rallying copper and, you know, this sort of minor precious metals, if I can call them that silver platinum palladium, also quarter massive bid in terms of their prices. So they rallied significantly. And I think that is definitely indicative of a lot of, I wouldn't, I don't know if it's hot money. Well, it may seem to be given the, you know, the sell-off that we've seen, but a lot of, lot more investor interest. So interest in the commodities more as an asset class, portfolio, portfolio diversification reasons. And it was led by gold. So gold was actually the sort of lead indicator and it pulled all the metals up. And we just have to look at silver as well, which is probably sits somewhere in between gold and copper as a cause, industrial cause, I press precious metal. So I think there was a lot of interest. And the last, I think the, if I have to, you know, sort of try and tease out what the, what the, what the sort of hot money versus fundamental prices, we saw the, when we had the initial supply disruptions in copper, we saw the price go to 10,000 above 10,000 and it fluctuated between 10 and 11,000 and then it rallied to well over 13,000. And I think that lost, you know, in my view, that lost sort of at least $2,000 a ton, $1,500 a ton is more indicative of investment flows as opposed to fundamental, fundamentally driven, you know, supply demand price. That's been fascinating. Let's move on to gold and use that as our segue because that sort of ties up nicely with where actually suddenly we're in a very different realm of, of this is largely about sort of as an asset class and, and, and, and investor sentiment and so forth. And I was just actually reflecting with my colleague this morning, who I was in, to buy with, you know, what a month ago or something two months ago, Valentine's Day. And so we both decided that we buy our, our respective partners are a gold bracelet, you know, nothing. But we were both a disappointed with how small they looked for the money. And now looking back, it now, I think I bought gold at the very peak ever in the, in the history of humanity. So it says that, you know, I shouldn't be anywhere near sort of both trading or making investment decisions for our family. But let's, let's tell that story before we get onto it because obviously this is a very fascinating story from a sentiment and a demand and this weaves in inflation as well. And, and all those different stories that we've kind of been tracking around de globalization and de dolorization and, and, and, and inflation. Just before we get there, what, what is the physical supply chain of gold? So the physical supply chain of gold is, is, is actually a lot more convoluted and it's, you know, I, I, I'm not here. I'm not a, an expert on this as, as much as I would understand copper. But, but certainly again, it, again, it starts at the mines. You know, this is, let's call it new gold. And the, the, the, the, the miners will typically produce a, an intermediate product. And if they don't have a cast house on site where they will produce, you know, pretty much 99.9% gold. Or they will produce a Dore, which is, you know, it's a mixture of copper, sorry, of, of gold and silver or gold and copper. It's the ball, but it's in a between 90% gold and they will then send it to a refinery. You know, my experiences South African, we used to send it to the Rand, Rand refinery when I used to work on a gold mine. Every sort of Friday, a helicopter would land and take the bars from the cast house and fly them over to Rand refinery under heavy security and the Rand refinery would refine it into, you know, typically bars which would then be sold for investors, you know, be it investors, retail investors, institutional investors or in some cases central banks. So, I mean, that's the very simplistic supply chain, but of course, there is all of this gold that has been mined over the centuries that still is with us, that people have hoarded and collected in coins and bars typically or various bits of jewelry or ornaments. And that infrastructure is a lot more opaque and that, you know, some investor classes will prefer the bars, some will prefer coins. And a lot of it will be, let's say, you know, in the vaults underneath the bank of England, will be stored there. Typically, that's more of the global central banks. But how that flows and moves, that's a little bit more difficult. You've got to be an industry insider to really understand how the sort of the store of physical gold moves around. - Which is kind of the feature, not the bug, right? I mean, that is what the goal is. The, just in terms of industrial applications, I mean, how, you know, I think sort of some seven to 10% of gold is used in industrial applications, particularly obviously in electronics. Is that growing, like, what's that bit of the equations before we sort of move on? Recognizing at the moment is relatively small. - Yeah, no, it is small and, and arguably that is pretty much, it's been shrinking, to be honest. You know, so if I look back, let's just go from 2010, we, the industrial demand was, there was technology, industrial was around 420 tonnes. That's dropped to around about 300 tonnes annually. Okay, we saw a little bit of a rebound. So, you know, with a lot more electronics and, and particularly some of the data centers wanting, you know, high-end electronics, it's bounced to 320. But essentially, you know, I would say that, as we've seen higher prices, you've certainly seen demand for jewelry and any sort of technology or industrial applications, we've, you know, we've seen demand destruction there because of the price. - Right, so if anyone comes to you and there's a gold bug because they think it's the, you know, the crucial element in chips. - Yeah. - No, that's definitely not going to be the case. - You should only listen to that. - No. - Particularly TV advert. Okay, so this is very much a story then of, a store of value, against, you know, Fiat currency to use the, the lingo, and one that unlike Bitcoin, there's no on-ramp or off-ramp that's necessarily going to get tracked by a government that is about to, you know, take control or whatever, whatever you're listening to. And in tight, it would strike me, I remember precisely, in 2008, you know, having a series, it might just just deride in the US and had a series that I'd never really heard the term gold bug before, but there was definitely some gold bug commodity traders who were, you know, encouraging you to do everything you could to buy bars of gold and bury it in your garden. Not that I hadn't a garden in my apartment, but, can you just tease apart the demand for gold? And essentially trying to, you know, governments versus people and kind of jewelry versus store of value and kind of, you know, a hedge against crisis, basically. - So yeah, I mean, it, and gold is quite mercurial. So I would say it's not a, it behaves more like a currency than a metalist itself. But in terms of, you know, demand, we've got, we've got jewelry demand, which is around, you know, give or take is the biggest sort of component, single component, and obviously investment demand is bigger, but if I break it down into the various categories. So, you know, jewelry demand is probably around, 2000 tons, a year that has been falling, I must say it's, you know, it's only around about, well, I think around about 1.5 this year because of the price impact, you know, it's just gold isn't that affordable for, from a jewelry perspective. Now, particularly in places like India, the jewelry will effectively be a store of value, but in many, many other cultures and countries, it's less so. And even in China, it's becoming less and less so. People want, you know, we'll want the bar as a store of value, not a jewelry piece. And bars and coins, you know, just around numbers around 1.2, yeah, 1.2, 1,200 tons. And then, you know, in this is where it gets. - So that's sort of 25%. - Yeah, yeah. - A jewelry sort of 50% bars and coins, 25%, is that, you know, 30%. - Yeah, I'm not bars and bars, so we're talking in terms of total demand around, let's call it 5,000 tons. Jewelry demand, okay, has shrunk from, let's call it 20%, it's down a little bit lower now, just below 20%. Bars and coins, slightly less. That's about 15%. Central banks, which are now, you know, have been a big driver, they are now, you know, from being sort of almost like 10%, are now, you know, nearly 20%. So they've really stepped up their allocation. And then the swing effect has been ETFs. So this is a relatively new feature of the gold market. And when I say new since the mid-2000s, where you've had physically backed ETFs. And the reason for ETFs is simply that, you know, if you buy gold, you've got to store it and ensure it and make sure it doesn't get stolen. And you know, if you're gonna hold a lot, you probably don't wanna hold it in your house and in a safe because you vulnerable to theft. So you'll probably pay somebody to store it for you and that carries a holding cost. So that's why ETFs were born. It's an easy way for you to own physical gold. So it's a, you know, yes, it's a contract, but it has to be one to one backed up by physical gold. So that's where you see the ETFs. And that has been a real swing factor over the last couple of years in the gold market. So we saw ETF art flows for up until last year. And then last year, the key swing factor in the gold market is we suddenly saw a big inflows into ETFs, particularly in China. And you know, is that sort of investment avenue gained a lot more traction? Hello, I'm David Hunt, Foundry Management Director at Hyperion Search. Founded over a decade ago, Hyperion Search has helped organizations from major utilities to startups recruit their leadership teams and key individual contributors to accelerate both their growth and the energy transition. Our three main verticals are renewable power, energy storage and the immobility. The energy transition and the talent that delivers it has been our passion since day one. To find out more of visit at HyperionSearch.com or listen to my lead is in Cleansept podcast, available on all platforms. By the way, on those ETFs, you know, these are set up as such that they're just centralising warehousing, but you do have that physical share backing the ETF? Yes, totally. I mean, you get other exchange-stated products where it is purely a financial contract. And in theory, that doesn't have a direct impact on gold supply demand. In practice, it does because some of those contracts will be backed up. Somebody will then go out and buy gold if they're going to sell a contract. They will buy the gold to ensure that they are hedged, and only clip the margin on the contract. But they don't have to. They can do it through other financial instruments. So when we look at the gold market in terms of demand, we look at it purely on the physically backed ETFs, just because we know that we can account for it. You've got to have the gold physically being stored if you're going to issue a contract. Yeah, OK. So let's tell this story in one of-- OK, you can see gold running up. There's a narrative about that, and Cretney Varmorong is essentially a story of US government fiscal irresponsibility, dare I say. And concerns over the dollar and inflation, devaluation, and so forth. And then at the same time, that dollar being covered on this podcast, and I'm saying it like you, but weaponized to an extent. Short. And so forth. Then gold is, as I'm in the Dubai gold super by my sadly small bracelet, gold is at an all-time high on that narrative. And then. the US and Israel attack Iran and gold prices go from 6,000 to 4,500 or whatever it might be. Which seems, I think, very counter-intuitive based on that narrative of one of protecting against sort of de-globalization and digitization and so forth. Can you help us understand what's going on there and from an investor standpoint and from a central bank standpoint? Sure, so look, I mean, the central banks, they are, they have very much program buying. So they wouldn't, of course, the sudden, you know, they wouldn't have suddenly dumped a whole lot of gold onto the market, particularly at a time of elevated risk. But, you know, the way I think about it is that gold is effectively an insurance policy against bad things happening, particularly bad geopolitical events that will stay in spill over into financial consequences. So, you know, I think the run up and gold towards the end of last year was partly momentum, a bit of a, you know, a FOMO trade as well. But if you want to sort of, let's take those factors out of it. In part, it was anticipating, you know, a geopolitical event happening in the world. And it's like an insurance policy. Once that bad event happens, you cash in your policy. So to a certain extent, I think that's what happened with gold is it was pricing in, you know, very elevated geopolitical risk, US policy, uncertainty risk. And, you know, we run these, we call them regression fair value models and we try and sort of say, well, you know, where is gold being priced relative to a whole host of other financial yardsticks. And gold was looking particularly expensive versus, you know, almost everything. And even when we took a basket of these things and we, you know, bundled them together in a regression model, gold was screening us, you know, almost, you know, at some points, $2,000 above what we would sort of say was fair value according to these models. So it was pricing in a pretty bleak world. Now, as I say, a lot of that, I think, was momentum, momentum trade as well. So in a sense, it is countering true to you, you know, as the world gets more scary, you buy more gold. But I think in this instance, gold had already priced that in and it was a classic market case of, you know, buy the run up to the event and then sell it, sell it when it happens. So I think that was certainly one component. And the other one was when you have a tussle for safe havens, you know, the dollar and gold often compete. And I think in this instance, the dollar went out, so the dollar sort of dollar went up and gold went down and that kind of made sense as well. And then there's also the fact that, you know, if we saw the global financial crisis as well, gold did go down in the first instance. In terms of if you have to cover margin calls and you need some, you know, you need some cash, gold obviously done very well and that was the funding trade as well. Yeah, you can't buy an airplane ticket with gold basically. No, so you need a cash. So you need dollars to get the hell out of dodge and to buy a 1911 as one of our previous guests pointed out. When you do those regression models just to understand that a little bit, you know, that is it, are you, you're sort of looking at all of these dependent possible variables and figuring out which one is the most salient in that or the big driver. And, you know, that essentially was pointing out kind of the fear of global, of this particular conflict coming out was kind of the, that $2,000. Yeah, so I mean, you know, we'd run, you know, we have a number of different sort of, let's call them variables that we can, we can put together. And for this one we use, you know, we would use things like the 10 year tips. So obviously gold being a, yeah, head against inflation. And a non yielding asset typically, but look at the, you know, the inflation expectations as well. And then there are these, these, these great indices that we have on the terminal. So there's a, there's a US policy uncertainty index. It's compiled. What's that? Yeah, no, that's been, that's spiked up to, it was, you know, really spiked on, on a few events. We're in COVID hit. So then there was massive uncertainty. And also when Trump was inaugurated, it spiked massively. And now with the Iran war, it's spiked massively. So, you know, it's slightly counterintuitively. And, you know, and typically gold has been pretty much positively correlated to when we have these spikes. But, you know, it's compiled by some economist Baker Blumen Davis. And we, you know, we put it on the, on the Bloomberg terminal and we use the, the output. Then there's also the geopolitical risk index. And that's done by, you know, so we, Mateo, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, I, and again, that's spiked massively with the, with obviously with the Iran conflict. And it almost got to similar levels as when Russia invaded Ukraine. So we use those, those indices and we, you know, we, we, we create a fair value out of that. And we try, and it's not trying to, how can I say it? It's not trying to sort of say, you know, this is where price, the price should be. If it's above this value, you sell where it's, where if you go below this value, you buy, it's more just to say, you know, let's get a sense of where gold is being priced versus a lot of other sort of financial yardsticks. And you know, as I say, for certainly from August last year up until very recently, when we had the sell off, you know, gold was looking very, very expensive. Actually, by the way, just while I, you know, I chuck in in Chinese, China's property prices as well, because in Chinese, you know, the go to investment was, was property. And you know, as property prices have been falling, gold is, you know, gained in popularity as a, as another place to go and, you know, preserve your wealth, because property is not doing it for you. So, you know, it's those kind of sort of, where they don't have also the sort of the shadow banking, or also being closed off as well. So you've actually got very, very few options over there with, with what's going on. The, the sort of the, I mean, this has been a wonderful sort of part one, part two. I mean, what has happened in that big run up in gold and that narrative has been that the trading houses have added gold desks to complement their base metal desks, right? That has been a big trend of the last year and a half. As think as we've seen from this, you know, there's a, copper is much more rooted in industrial world, and that fair value, and tell me if I'm wrong here would be sort of easier to divine or get some sense of. There are fewer, fewer variables kicking around. So, so the kind of like, you know, the, the what does that mean and why are they doing that and, and how will gold track over on to? Because, and, and I guess at the same time is the kind of the, the goldification of copper if I can use that phrase as well, and some of the other industrial, you know, critical minerals in general, tungsten you and I were talking about, you know, off air. You know, how much is this, the narrative that's out there in general in your mind is, is, has complicating matters or inflating values and also amplifying the swings as, as these minerals sort of enter the, have gone from kind of being obscure columns in the back of the Wall Street Journal to front page of the Wall Street Journal and front page of the, of the FT. So, I'm, I must be honest, I'm a little bit, you know, sanguine about, you know, about this sort of, let's say the, let's say the, the copper being perceived as a, as an asset class akin to gold. And, you know, for me the, the copper price, by and large, was underpinned by fundamentals. So if I look at my, you know, my, my supply demand balances, you know, copper has been in a deficit since 2023. And, you know, I think it's going to stay in a deficit for this year, okay, obviously depends on the duration of the Iran War, the longer it drags on, the more likely we, we, we're likely to flip into a surplus. But let's just say we, if we have a quick resolution, I know that's looking less likely, but if we have a quick resolution, copper is probably going to be in another year of deficits. So, you know, I'm very happy, well, I do think that the price is fundamentally justified by, you know, industrial supply demand. There may be a little bit of froth on it where we've seen either narrative of, of, you know, the whole sort of thematic investment on AI and decobinization, add a little bit to the price. But I think that's always been the case and we've seen the, you know, I've seen that in the, in the sort of late 2000s when it was, you know, we had the China investment theme and, and copper prices rallied particularly hard and some of it wasn't always justified by fundamentals because the copper wasn't as tight as the price would have suggested and there was a bit of interest. But in my experience, it tends to peter out quite quickly. So, I, you know, I'm, I'm a, I don't see the risk that, that, that copper is really going to, It's going to suddenly turn into this metal where a kin to gold. I'm not in that camp. Lots of others will disagree with me, but I think it is ultimately does revert to fundamentals. Every time I go to the FT conference, I sort of walk out thinking that copper is going to go to the moon because that narrative is very much, as you say, underpinned by some pretty GDP independent events that need to happen, not least just replacing and upgrading the grids around the world to meet the new technologies. And yeah, gold is a much more finicity beast when it comes to some of these things. I think we've done our job in part one and look forward to our panel meeting in person in Geneva on April 22nd, hosted by Blueberg Intelligence. And we'll see what state the both markets and the world is in by that point. But, you know, Grant, it's been a real pleasure having you on and look forward to continue the discussion. Thank you very much for having me, Paul. And yeah, look forward to seeing you in Geneva. Thank you for listening. To find out more about HC Group, our global offices and our expertise in search within the commodity sector, please visit www.hcgroup.global.