The Global Commodity War Has Started... Gold’s Biggest Bull Market in 50 Years w/ Nicky Shiels

Quick Overview

Nicky Shiels, Head of Research and Metal Strategy at MKS PAMP, believes gold is currently in the mid-cycle of a cycle that began in the 1970s, driven by geopolitical uncertainty, inflation, and central bank policy, suggesting that while silver's performance lags, gold is poised for a significant bull market, potentially reaching $2,400 to $2,500 per ounce.

Key Points: Nicky Shiels forecasts gold could reach $2,400 to $2,500 per ounce if current geopolitical and policy factors persist. Shiels views the current market as mid-cycle for the commodity, similar to trends starting in the 1970s. Key drivers for precious metals are geopolitical uncertainty (Russia/Ukraine, China/Taiwan), inflation, and US policy creating fiscal uncertainty. Silver is currently lagging gold, trading at a discount, but gold is acting as a better short-term hedge against volatility. The market currently exhibits speculative positioning, with retail investors overinvested and sentiment being extremely bullish. Shiels notes that Western monetary policy, particularly US actions, is perceived as decades behind industrial supply constraints, creating potential for future volatility. A key difference this cycle is the expectation that central banks might not aggressively raise rates, unlike past tightening cycles.

Context: The Milk Road Macro podcast hosted John Gillen interviewing Nicky Shiels, Head of Research and Metal Strategy at MKS PAMP, a leading Swiss precious metals firm. The conversation focused on the current state and future forecasts for precious metals, particularly gold and silver, analyzing macro factors like geopolitical events, inflation, and central bank reactions that influence their prices.

Detailed Analysis

Nicky Shiels argues that the current precious metals market is in the mid-cycle phase of a longer-term cycle originating in the 1970s, driven by several key factors. The primary drivers include geopolitical uncertainty, such as the Russia-Ukraine conflict and tensions involving China and Taiwan, which increase the need for safe-haven assets. Inflationary pressures, coupled with US policy creating fiscal uncertainty and potentially leading to fiscal dominance, also support precious metals. Shiels notes that while gold is acting as a more effective short-term hedge against volatility than silver, silver is currently lagging gold, trading at a discount historically. She highlights that speculative positioning shows retail investors are overinvested and sentiment is extremely bullish. However, Shiels suggests that Western monetary policy, particularly in the US, appears behind the curve concerning industrial supply constraints, which could lead to higher inflation if not addressed. She maintains a positive outlook for gold, suggesting a target of $2,400 to $2,500 per ounce if current conditions persist. She also points out that silver's industrial demand (like from EVs) and geopolitical factors are creating a dual narrative, but gold's historical performance as a hedge makes it the preferred short-term play. Shiels advises investors to be nimble and aware of potential policy shifts that could rapidly change market narratives.