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00:00Very pointed comments there coming through from the White House trade adviser Peter Navarro, likening the war in Ukraine to Modi's war. That's probably a bit of a stretch. I can't imagine that's going to go down well amongst Indian authorities. But let me just ask you, as far as it pertains to oil markets, do you think oil markets are perhaps being too complacent about the real possibility of extra sanctions or extra economic sanctions on Russia, Russian oil, potential disruption to Russian oil and global markets in the coming months? That's a very good question. I think it's fair to say that there's almost no risk premium in the market. So if you're going to talk about asymmetries around if you were to have a disruption in it, would that lead to a skew in terms of the price response? There's very, very little, if any, risk premium in place at the moment. But then I think you can argue that that's actually a reasonably rational position for the market to take in the context of the fact that we obviously haven't lost any Russian barrels from the market to date and that although let's say you had a scenario where, for example, you did see a reduction in Indian buying of Russian crude, you then need to assume that that couldn't trade reshuffled to find another buyer and so that that material would be lost from the market. And also that comes in the context that on an underlying basis, in our view, you have a global surplus of around about 2 million barrels a day at present, so that you've got quite low slack in the market for full reshuffling to take place. So that actually, Yes, okay, very little risk premium and yes, that creates a little bit of a skew. But I think it's fair that that's where the market is at the moment. Okay. That 2 million surplus number stands out to me. I think it's on the loftier side of of analyst estimates. What does that translate to in terms of where you forecast the price of oil to go by the end of the year? So our view is that I think as we go into the end of this year and then really looking into two next year, you're going to need at some point prices to trade towards levels which would see no growth in terms of US shale supply. And that in our view on said WTI basis, that is prices going into the high or really the mid fifties is what you need to achieve that. And I think that really a key point there that our colleagues in our Houston team have made is if you look at the efficiency gains that have been achieved by the shale producers, that has brought down that break even point and lowered the sort of numbers you'd need to get to to get into a no growth scenario for full shale production. Interesting. I'm going to take you on slightly a slightly different tact. I know that you also look at the metals market very closely. What are you thinking on on gold here? We had such a massive run up at the beginning of the year, but things are sort of stalled around these levels. Do you expect that we're going to get another leg up given some of the recent uncertainty that is emanating once again from the Trump administration, not least as it pertains to Fed independence? Yeah. I think if you look at the backdrop for gold, what's been quite notable over the past, let's say three months is that you've had a series of additional potentially bullish developments for the market and yet it's it's remained rangebound it's not been able to break out. And so I think that in itself indicates elements of the rally being a little bit long in the tooth. But the Fed independence point I think now is really key in terms of whether we have seen the highs for this year on that brief touch of 3500 or if you can take another leg up. And so if and we'll see obviously really how the legal and the political process plays out, if Governor Cooke would remain in post, then I think you're arguing gold needs to find something additional or really it's going to stay rangebound and probably pull back to the bottom end of that range. If, however, Governor were to leave and you open up the possibility for Trump, so to speak, to have a majority of his appointees amongst the Fed governorship, you then raise some of these questions about what happens with the regional Fred presidents. Then I think the market needs to put a much different risk premium into gold with regards to the outlook really over the longer term for US monetary policy and Fed independence. And that would be an extremely bullish development for the market. So can gold do well in an environment where stocks continue to make record highs, record high after record high? I think it depends on what the causation is in the sense that if you look at gold's correlation with equities over time, the correlation roughly averages about zero versus the S & P 500 periods of positive correlation, periods of negative correlations. It comes down to the causation. Let's say you have a period where stocks continue to rally because you're getting Fed easing, but that actually that Fed easing is probably is potentially excessive in the context of the underlying economic conditions. And I'd say the inflation backdrop and it were to, for example, increased long run inflation expectations, then you could argue, yes, absolutely, gold can rally in that environment even if equities are still continuing to perform well.

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Fed Independence Point Key to Gold Prices: Macquarie

Gold was steady after a two-day gain on concern over the independence of the Federal Reserve and inflation risks in the US. Meanwhile, oil fell as traders looked past US efforts to force India to quit buying Russian crude. Marcus Garvey, Head of Commodities Strategy at Macquarie spoke to Bloomberg’s Horizons Middle East and Africa anchor Joumanna Bercetche. (Source: Bloomberg)

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