Exploring Investment Cycles in Gold and Associated Metals

Tom welcomes back Tavi Costa from Crescat Capital to discuss the emerging bullish cycle in the metals and mining sector. Costa believes we are in the early stages of a long-term commodity cycle, with gold leading the way and other metals poised to follow. The discussion centers on three primary pillars: energy sources, infrastructure, and raw materials. Costa argues that the increasing electricity demand, driven by artificial intelligence and onshoring trends, will create significant opportunities in metals and mining. He emphasizes the critical need for metals to support emerging technological and infrastructure developments, particularly in the United States.

A pivotal moment Costa highlights is the U.S. Department of Defense’s 15% stake in MP Materials, which he sees as a recognition of strategic material vulnerabilities. This investment signals a potential shift in how governments view critical resources and mining infrastructure. Costa also discusses the potential macroeconomic trajectory, suggesting two potential paths: a deflationary shock or an inflationary era followed by a highly efficient, deflationary period driven by AI. He believes we are currently in an inflationary buildup phase that will eventually transition to increased productivity and efficiency.

Regarding currencies, Costa anticipates a long-term decline in the U.S. dollar versus other currencies, driven by significant fiscal and trade deficits. He sees this as part of a broader “domino effect” of macro trends, where acceptance of risk gradually moves through different asset classes and markets. The interview concludes with Costa identifying the exploration and development phase of the mining industry, alongside emerging markets, as potentially the most asymmetric investment opportunities of his career. He encourages investors to pay attention to the interconnected nature of these macro trends and the gradual rotation of capital across different sectors and geographies.

Timestamps:
00:00:00 – Introduction
00:00:49 – Gold to Commodity Ratios
00:06:03 – Markets Interconnected
00:12:23 – Com. Correlations & Silver
00:18:26 – Platinum & Lease Rates
00:21:40 – Dept Defense & Miners?
00:27:12 – Commodity Opportunities
00:31:50 – Energy & GDP
00:38:14 – Low Prices & Capital Investment
00:40:25 – Capital Paying Attention
00:45:29 – Debt Risks & Inflation
00:50:09 – Gold Long-Term Outlook
00:54:48 – Dollar Trend Concerns
01:02:04 – U.S. Equity Valuations
01:05:16 – Concluding Thoughts

Guest Links:
X: https://x.com/tavicosta
X: https://x.com/crescat_capital
Website: https://crescat.net

Disclaimer: The opinions and information shared by Tavi in this discussion are his own, and not necessarily those of Crescat. Any investments discussed may or may not be held by Crescat. Investments carry risk including risk of loss.

Otavio (“Tavi”) Costa is a Member and Portfolio Manager at Crescat Capital and has been with the firm since 2013. He built Crescat’s macro model that identifies the current stage of the U.S. economic cycle through a combination of 16 factors.

His research is regularly featured in financial publications such as Bloomberg, The Wall Street Journal, CCN, Financial Post, The Globe and Mail, Real Vision, and Reuters. Tavi is a native of São Paulo, Brazil, and fluent in Portuguese, Spanish, and English. Before joining Crescat, he worked with the underwriting of financial products and international business at Braservice, a large logistics company in Brazil.

Tavi graduated cum laude from Lindenwood University in St. Louis with a B.A. degree in Business Administration with an emphasis in Finance and a minor in Spanish. Tavi played NCAA Division 1 tennis for Liberty University.