Oil, Gold & Global Markets: Why Energy and Metals Could Lead the Next Investment Cycle

In New York morning trade, we are looking at oil.

Both WTI and Brent higher by 2.5%.

Now yesterday we did see energy stocks drop along with oil.

Now the US met with Iran for nuclear talks and Iran's foreign minister hinted at some progress and we've also been seeing energy stocks come back with Chevron up 16% in the three months.

And ExxonMobil up 23% in that same time period.

Separately this morning we are looking at precious metals trying to eke out a gain with gold and silver higher, but yesterday we saw a pullback.

Now with recent volatility in the AI trade investors looking for opportunities outside of big tech, and this could include metals as well as energy.

Well joining me.

And this morning is Costa, who is co-founder and CEO of Azuria Capital.

To, great to have you here.

Thank you so much for joining me.

So we've been seeing plenty of volatility across all asset classes, but I know you've been tracking the rally we've seen in precious metals.

So do you think both gold and silver are consolidating right now, or do you think gold has more room to run?

No, I think it's much needed consolidation.

I'm sure there's a lot more to run.

This is, we're in the middle of a very long term cycle for gold and precious metals overall.

The supply remains very constrained.

We haven't seen really changes in terms of the supply side of things in regards to production, discoveries, capital spending.

Everything leads to a very constrained supply environment for the following years, which tends to actually be a very important leading indicator for these types of metals, and so.

I don't think that the picture long term has changed, but we did see a very large move, and all we're seeing right now is just a major digestion of those price changes.

Minors still, you know, sort of pricing in that the market will return to a low price, low metal price environment.

Not my view.

I think that we're in a, in a regime where metal prices will remain.

Elevated historically speaking, you know, if silver, let's say, bounces between $50 to $70 an ounce or so and stays in this range for a while, these are historic prices relative to what we've seen over the years.

And so this is a very stable, believe it or not, a very stable and sustainable price environment that would change the economics of a lot of these businesses in my view.

And while we're on the topic of commodities, I do want to get your take on oil.

So this morning we are looking at both WTI and Brett higher, and we're continuing to monitor geopolitics, including talks between the Ukraine, Russia, as well as between the US and Iran.

But take us through the energy sector's rebound and what you think.

I, I think this rebound has a lot of legs.

I, I don't think we're, we're done here at all.

I mean, I think this is the beginning of a resurgence in energy that a lot of people are perhaps not considering as, as a real movement for many reasons.

I think first of all, positioning remains, uh, most investors are off guard.

Energy remains very under-owned by most institutional, uh, folks, uh, and on top of it all, you just look at the reallocation from the commodity space where gold to oil ratio is, is at one of the highest levels in history, silver to oil ratio, one of the highest levels in history.

So those folks that have made enough money in those parts of the markets are starting to redeploy that into energy, including myself, and so I do think that there's a lot of value in investing in this, and I would say as well that it's very usual to see gold stocks lead the way, copper stocks follow the way, and then energy stocks. are the ones that tend to lag a little further, but then they start to move in a very explosive manner.

I think what we were seeing with Exxon, you mentioned Exxon at the very beginning of the conversation, is more of a signal of what is likely to occur with the broader sector.

And so I'm paying very close attention to that because I do think that the energy space is going to be a very profitable place for investments in the near future.

You are coming to us from Brazil and you just mentioned a word and that is value.

So tell us about the opportunities you're seeing in the emerging markets.

Uh, emerging markets are highly linked to what's happening with gold.

I mean a lot of people tend tend to see these trends are very unique themselves, but The nature of these movements are very interconnected with the precious metals cycle itself.

When the precious metal cycle is initiated, you tend to see other metals, industrial metals, begin to move as well.

Once other metals begin to move, commodities broadly begin to move, and as we all know, emerging markets like Brazil, Latin America overall have a very large exposure to commodities.

If you get the commodities call right, you Going to get a lot of economic growth that fundamentally will improve those countries in a large way.

So yes, I am speaking from Brazil.

I'm extremely bullish in this country.

Over the next 5 to 10 years.

I think there's going to be a lot of opportunities not just in commodities themselves, but in traditional markets, real estate, banks, consumer companies, and so forth.

I think there's going to be lots of ways to play this.

And just a reminder for most folks, uh, when you look at, you know, emerging markets themselves look really cheap right now relative to US assets, uh, but also pay attention as well to the fact that there might be a rebalancing within the emerging markets index.

Right now, 80% of that index of MSCI emerging Markets index is about 80% on Asia.

Uh, only 7% of the index is in Latin America.

America, of which the majority of it is in Brazil, and so that needs to be separated, or, I guess, uh, the flows needs to be more equally distributed in other countries that have tremendous opportunities.

And so I do think there's going to be a lot of rotation into this market.

Uh, most of these companies are extremely cheap and you may see, uh, what, what I call the most uh explosive combination that you tend to see, which is compressed multiple.

Alongside with, you know, double digit growth, and if you have that, that's where you see exponential growth.

And keep in mind, even Drug Miller just recently actually reported that it is one of his largest positions, uh, in the Brazilian markets as well.

So everything is coming along, you know, in a, in a big way.

I think this is a structural shift, not, not, not a cyclical one.

I think I really think this is a structural change politically and economically, so very exciting.

Yes, and some key points there that you just made, Tavi, because the conversation here on Wall Street, especially within the US, is about opportunities and markets outside of the US, but you have a unique vantage point here.

So given the volatility we've seen in the US equities, the outperformance and indexes across the globe, what is your read on what we're seeing in the big tech companies and in particular the AI trade?

I think we've seen probably the peak of this concentration of Magnificent 7, Magnificent 10, if you will, in terms of concentration of the markets.

I don't think they're going to stop anytime soon in regards to spending.

The capital spending of these companies will likely continue to be the case, and that's because these companies are fundamentally strong and are capable actually of, of, of continuing to spend those levels of Of money into infrastructure and other things, so that is going to sort of set off a capital rotation from the cash flows of these companies into the earnings of most of the other pillars in the economy.

I call it three pillars that are likely to really benefit from this.

It's energy itself.

It's also materials, and the last one is infrastructure, which involves.

Utilities and and engineering companies and others uh that are part of that, that pack and so there's going to be a lot of, of, of important things and I would say that one other aspect that I didn't mention in your prior question that I think applies to your question here is the weakening of the US dollar, the weakening of the US dollar that we're seeing here because of the amount of deficits that we have on the fiscal and the trade balance.

Side are likely to create or set the stage for a long term decline of the US dollar versus other fiat currencies as we see that occurring, it tends to also unleash a that the rest of the world tends to outperform US markets, and I think that a lot of institutions are still, you know, not positioned for a world like that.

And as we see that occurring, it's going to change the Dynamic of volatility of the Mac 7, going back to your question, technology sector and others that have attracted most of the flows over the last few years.

I do think we're seeing, you know, macro doesn't happen all on the same day, and I think we're seeing those changes happen in real time, um, and it's going to take time.

However, uh, it is, it is happening slowly, gradually, uh, but definitely, uh, certainly in my view.

Well, Tavi, we we'll have to leave it there, but thank you so much for highlighting the US currency at the end of our segment, and I appreciate your insights as well as perspective.

Thank you.