Welcome to episode 4 of The Art of Investing, entitled "All That Glitters" - our commodity special exploring various forms of gold, from black gold (oil) and green gold (copper) to traditional gold and digital gold (Bitcoin). Join Rich McDonald, Chris Fellingham and Mark Holden as they complete their deep dive into asset classes ahead of next week's big portfolio launch.
This week covers a massive avalanche of company earnings, with 25% of the S&P 500 reporting results that pushed NASDAQ and S&P 500 to new all-time highs. The FTSE 100 also hit record highs for the second week running. However, copper experienced its biggest single-day fall ever - dropping over 20% after Donald Trump modified tariff policies for raw versus manufactured copper imports.
Discover the fundamentals of commodity investing, from supply and demand dynamics to storage costs and the crucial role of China, which buys over 50% of all global commodities. Learn why it takes 25 years to bring a new copper mine online and how mining companies have become more disciplined with capital expenditure, creating supply constraints.
Explore the precious metals market, where gold makes up three-quarters of the sector, with 45% going to jewellery and 25% to investment demand. Hear the cautionary tale of Gordon Brown's gold sales at $220 per ounce - now trading at $3,300. Understand why India and China account for over 55% of global gold demand and the surprising fact that all gold ever mined would only fill 3.5 Olympic swimming pools.
Get introduced to Bitcoin as "digital gold" - from the famous $1 billion pizza transaction (10,000 Bitcoin for two pizzas in 2010) to its limited supply of 21 million coins and potential role as an inflation hedge and store of value.
What you'll learn in this episode:
- Commodities Are Dollar-Denominated: All commodities are priced in US dollars, making the dollar's strength a crucial factor in commodity performance. When the dollar falls, commodity prices typically rise, making currency views essential for commodity investing.
- China Dominates Commodity Demand: China purchases over 50% of all global commodities, with even higher percentages for specific materials like iron ore (75%). Understanding China's economic health and stimulus policies is critical for commodity investment decisions.
- Supply Constraints Drive Long-Term Pricing: Mining companies learned from previous over-investment cycles and now exercise capital discipline. With no major new copper mines expected for decades due to 19-25 year development timelines, supply constraints support higher prices.
- Gold Remains Scarce and Valuable: All gold ever mined throughout history would only fill 3.5 Olympic swimming pools or half of St Paul's Cathedral dome, highlighting its extreme scarcity and enduring value as a store of wealth.
- Bitcoin Offers Digital Scarcity: With only 21 million Bitcoin ever to be created and 19.7 million already mined, Bitcoin provides programmable scarcity that could serve as "digital gold" - offering protection against currency debasement and inflation like traditional gold.
Next week: The live portfolio launch where the team will construct their target 10% annual return portfolio using ETFs across all the asset classes covered in recent episodes.
Download the Portfolio ETF's list here.
Get in touch with the show by emailing theartofinvesting@ig.com
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