Theme and Background
This chapter focuses on the structural impact of deglobalization and the clean energy transition on global markets. The report argues that energy markets are undergoing a reshuffle, with energy security now equated to national security, driving a decade characterized by commodity intensity, high inflation, and capital intensity. In 2022, asset class performance diverged markedly: gold fell 0.28%, silver rose 2.77%, uranium gained 14.74%, lithium carbonate surged 72.49%, while the S&P 500 dropped 19.44%, and the 10-year U.S. Treasury yield soared 236 BPS to 3.87%, marking the largest annual increase since 1963.
Core Thesis
The author’s core investment thesis is that deglobalization is reversing the low-inflation, low-volatility regime of the "Great Moderation" era over the past three decades, leading to supply chain disruptions, rising inflationary pressures, and heightened macro volatility. Counterintuitive judgments include: 1) The energy transition is not a distant threat but an imminent national security necessity; 2) The upcoming commodity supercycle will feature both supply shocks (e.g., sanctions on Russia) and demand shocks (energy transition, reindustrialization, military rebuilding); 3) The dollar system faces long-term de-dollarization pressure from the rise of the "Petroyuan."
Key Arguments and Data
- Reversal of the "Great Moderation" Era: From the 1990s to 2020, factors such as globalization, deregulation, technology, debt, and demographics jointly created low inflation and low volatility. These forces are now reversing, with deglobalization set to push up inflation and macro volatility.
- Supply Chain Restructuring: Inventory models are shifting from "just-in-time" to "just-in-case," requiring more supply and higher inventory levels.
- Reorganization of Energy Trade Flows: The U.S. has sanctioned countries accounting for 40% of global oil reserves (Russia, Iran, Venezuela), with this oil flowing to China at steep discounts. China is building long-term procurement and upstream investment relationships with GCC countries (Saudi Arabia, UAE, Kuwait, etc.), which also hold 40% of global oil reserves, while promoting a yuan settlement system ("Petroyuan").
- Drivers of the Commodity Supercycle: The West will invest trillions of dollars over the next decade in: 1) rearmament; 2) supply chain reshoring; 3) clean energy infrastructure. These triple demand shocks, combined with a decade of underinvestment, sanctions on Russia, and resource nationalism, create dual supply and demand shocks.
- Historical Comparison: The 1970s were a turbulent macro environment filled with nonlinear left-tail risks, and the current parallels are unsettling.
Companies/Assets Involved
This chapter does not mention specific companies, focusing instead on macro asset classes and geopolitical entities:
- Commodities: Uranium, copper, lithium, gold, silver, oil, etc. The report is bullish on energy transition materials and precious metals.
- U.S. Dollar Index (DXY): Rose 8.21% in 2022, but the report believes momentum has peaked and faces support tests.
- S&P 500: Fell 19.44% in 2022, its worst annual performance since 2008.
- U.S. Treasuries: The 10-year yield surged 236 BPS, the largest annual increase since 1963; the 10-year real yield soared 267 BPS, the largest annual increase since 1998.
- China and GCC Countries: China is deepening energy-financial cooperation with GCC countries through yuan settlement, currency swaps, and foreign exchange trading systems, advancing the "Petroyuan" system.
Investment Implications
Investors should focus on the following directions:
1. Long Energy Transition Materials: Uranium, copper, lithium, etc., due to structural supply shortages and surging demand, will benefit long-term from deglobalization and the clean energy transition.
2. Long Precious Metals: Gold and silver, in an environment of high inflation and heightened macro volatility, offer safe-haven and value-preservation functions.
3. Beware of Dollar Weakness: The de-dollarization trend (rise of the "Petroyuan") may weaken the dollar’s reserve currency status, benefiting non-dollar assets and commodities.
4. Avoid Traditional Stocks and Bonds: The S&P 500 and Treasuries performed poorly in 2022, with the report suggesting that high inflation and rising interest rates will continue to pressure these assets.
Theme and Background
This chapter focuses on the demand outlook for key metals in the energy transition (uranium, copper, lithium). The report argues that the Russia-Ukraine war and the deglobalization process have transformed long-term structural demand into an immediate demand shock, with energy security now equating to national security, pushing these metals into a state of strategic scarcity.
Core Views
- Uranium: Nuclear power is the only energy source that combines a high capacity factor (93%), low carbon emissions, and baseload power generation. Uranium demand will continue to outpace supply, with 2022 marking a turning point in uranium market sentiment.
- Copper: After a decade of underinvestment and pandemic disruptions, copper faces a structural supply deficit, with inventories at historically low levels. Demand from the energy transition (renewable energy systems require 5-7 times more copper than traditional designs) will drive long-term price increases.
- Lithium: Lithium-ion batteries have "no alternative" (TINA) in electric vehicles and energy storage. Demand is expected to grow from 500,000 tonnes of LCE in 2021 to approximately 3 million tonnes by 2030 (a compound annual growth rate of 22%). China's monopoly in the midstream and downstream sectors (accounting for 70% of battery production capacity) poses a supply chain security risk for the West.
- Contrarian View: Energy transition metals may be more resilient to economic cycles than basic commodities, as supply chain security concerns will outweigh cyclical forces.
Key Arguments and Data
Uranium:
- Russia controls 39% of global uranium enrichment capacity and 27% of conversion capacity. Sanctions will force the West to adopt "overfeeding," significantly increasing U3O8 demand.
- Kazakhstan supplies 45% of the world's uranium, but its internal instability and relationship with Russia expose supply chain vulnerabilities.
- In 2022, the uranium spot price was $48.31, up 14.74% for the year.
Copper:
- Inventories are at "critically low levels," with Figure 2 showing a continuous decline from 2013 to 2022.
- Renewable energy systems use 5-7 times more copper than traditional designs, and electric vehicles use 3 times more than internal combustion engine vehicles.
- Short-term risks: A global recession, China's growth challenges, and seasonal weakness in Q1 could lead to price corrections; however, seasonal buying in Q2 combined with low inventories could trigger a price squeeze to the upside.
Lithium:
- Demand growth: 500,000 tonnes of LCE in 2021 → approximately 3 million tonnes of LCE by 2030 (22% annual growth vs. 3% for mature metals), with batteries accounting for 95% of demand.
- China's control: 13% of lithium mine production and 8% of reserves, but a very high share in the midstream and downstream—45% of lithium carbonate/hydroxide, 75% of cathode materials, and 70% of lithium battery cells.
- In 2022, the lithium carbonate price was $34.16/lb, up 72.49% for the year.
Comparative Data:
| Metal/Index |
2022 Price/Performance |
Key Drivers |
| Uranium Spot |
$48.31, +14.74% |
Nuclear policy shift, supply chain vulnerability |
| Copper |
Historically low inventories |
Underinvestment + energy transition demand |
| Lithium Carbonate |
$34.16/lb, +72.49% |
EV demand surge, China's monopoly |
| EV Battery Metals Basket (2020-2022) |
Consistently outperformed Bloomberg Commodity Index and Industrial Metals Index |
Structural demand from energy transition |
Companies/Assets Involved
- Uranium: No specific companies are named, but the report implies that Western uranium miners (e.g., Cameco, Kazatomprom) will benefit from supply chain reshoring and price increases.
- Copper: No specific companies are named, but large copper miners such as Freeport-McMoRan, BHP, and Glencore will benefit from the structural deficit.
- Lithium: No specific companies are named, but lithium producers such as Albemarle, SQM, and Livent will benefit from demand surges; Chinese midstream companies (e.g., Ganfeng Lithium, Tianqi Lithium) face the risk of being replaced by Western supply chains.
Investment Implications
- Uranium: Go long on uranium mining stocks and uranium physical ETFs (e.g., URA, U.U), with a focus on the restart of Western uranium mines and new supply projects outside Kazakhstan.
- Copper: Accumulate copper mining stocks (e.g., FCX, SCCO) on dips, using Q1 seasonal weakness to build positions, and wait for the Q2 inventory squeeze; hold long-term to capture energy transition demand.
- Lithium: Go long on non-Chinese lithium miners (e.g., LAC, LTHM), benefiting from Western supply chain localization policies (e.g., the U.S. Inflation Reduction Act); be wary of midstream overcapacity risks in Chinese lithium stocks.
- Overall Strategy: Build an energy transition metals basket (uranium + copper + lithium). Its consistent outperformance relative to traditional commodity indices (2020-2022) suggests the theme has structural excess return potential.
Theme and Background
This chapter focuses on the investment outlook for the precious metals market in 2023, set against the backdrop of the most aggressive rate-hiking cycle by the Federal Reserve in 40 years in 2022, which pressured valuation multiples and long-duration assets. The report argues that due to the lagged effects of monetary policy, risks to the economy and financial system may erupt in a concentrated manner in 2023, providing structural opportunities for gold, silver, and gold mining stocks.
Core Thesis
The author's core judgment is: Gold will test its upside potential in 2023, silver is at an oversold long-term low, and gold mining stocks are breaking free from excessive correlation with the broader market. The contrarian view lies in the fact that, although rate hikes are typically bearish for gold, the author believes the end of the rate-hiking cycle, the trend of de-dollarization, and recession risks will drive gold to outperform commodities; silver, after record ETF selling, has strong fundamentals but is extremely undervalued.
Key Arguments and Data
1. Gold:
- Gold prices retreated from their March 2022 highs, primarily driven by CTA-type fund trading flows, with the 6-month rolling change in CFTC net non-commercial positions indicating selling intensity.
- China's gold import volumes surged in 2022 and early 2023, potentially linked to renminbi-gold convertibility and the "petro-yuan" system; de-dollarization positions gold as an "external currency" for cross-system settlements.
- Figure 5b shows that the 2s10s yield curve (forward 12 months) is a leading indicator for the Bloomberg Commodity Index/Gold ratio; the current deeply inverted curve signals a recession, suggesting gold may outperform commodities in 2023.
2. Silver:
- Silver closed 2022 at $23.95, up 2.77% for the year. From its March high, combined CFTC and ETF liquidations totaled 818 million ounces (52% of total supply), marking the largest retail-dominated ETF sell-off in history, characterized by capitulation selling.
- At the September 2022 low, CFTC silver positions were at the 3rd percentile of the past 10 years, ETF silver drawdowns reached -25% (previous maximum drawdown around -10%), and the silver/gold ratio hit the 1st percentile and a 40-year support level, indicating extreme undervaluation.
- Silver's fundamentals are strong: future demand growth is almost entirely driven by solar panel manufacturing (China accounts for 84% globally), and silver possesses both energy transition metal and monetary attributes.
3. Gold Mining Stocks:
- In 2022, the 30-day rolling correlation between gold mining stocks and the S&P 500 reached a 10-year high, as Fed tightening led to homogenized selling of all equities.
- As the Fed signals an end to aggressive rate hikes, the excessive correlation between asset classes is beginning to unwind. Figure 7b shows diverging returns across asset classes in Q4 2022, with precious metals ("quality" assets) recovering from the liquidity vortex, while fundamentally challenged assets continued to weaken.
Companies/Assets Involved
- Gold Spot: The report is bullish, expecting it to test upside potential in 2023, with de-dollarization and recession risks as catalysts.
- Silver Spot: The report is strongly bullish, viewing current levels as a 40-year extreme undervaluation, with solar demand driving long-term growth.
- Gold Mining Stocks (Gold Miners Index): The report is bullish, arguing that after the unwinding of excessive correlations, fundamentals will re-dominate pricing, with Q4 already showing a rapid recovery.
- China: As a major gold importer and solar panel manufacturing hub, its policies (renminbi-gold convertibility) and demand shifts are key variables.
- Federal Reserve: A policy pivot (ending aggressive rate hikes) is the trigger for the precious metals rebound.
Investment Implications
- Gold: Overweight gold in 2023, especially during a "hard landing" for the economy, as gold's excess returns over commodities will be more pronounced. Monitor the impact of renminbi-gold convertibility mechanisms on pricing logic.
- Silver: The current silver/gold ratio is at a 40-year low, with significant mean-reversion potential. Given the irreversible growth in solar demand, silver is a scarce asset combining safe-haven and industrial attributes.
- Gold Mining Stocks: As markets shift from liquidity-driven to fundamentals-driven, gold mining stocks have substantial room for valuation recovery. The Q4 rebound indicates they have decoupled from excessive correlation with the broader market, making them suitable as leveraged tools for gold exposure.
- Risks: If the Fed unexpectedly continues aggressive rate hikes or the dollar strengthens, precious metals may face short-term pressure; however, the report believes this probability has significantly decreased.