Episode Details

Stijn Schmitz welcomes back Steve Hanke back to the show. Steve Hanke is a Professor of Applied Economics at Johns Hopkins University. Hanke highlights the two major wars—the U.S.-Israel conflict with Iran and the Ukraine war—as critical disruptors of global commodity flows. He notes that the Strait of Hormuz is effectively closed, with Iran controlling it, and the Houthis threaten the Red Sea chokepoint, severely constricting crude and refined product supplies. Russia’s cutoff of diesel exports and domestic fuel shortages compound the strain. Oil markets are in backwardation, with spot prices above futures, signaling dangerously low inventories that have cushioned prices so far but are nearing depletion. Hanke warns that once physical inventories run out, oil prices could spike dramatically, potentially later this summer. He advises going long on oil, especially major producers, as a straightforward trade for most investors.

On gold, Hanke maintains a bullish outlook, projecting a peak around $6,000 per ounce based on historical ratios to real disposable income. He attributes recent pullbacks to dollar strength and rising interest rates but sees central bank buying as a fundamental driver. He also discusses the pressure on the Fed to monetize debt, which could fuel inflation and support gold. The conversation shifts to the broader commodity supercycle, fueled by deglobalization, underinvestment, and the need for larger precautionary inventories. Copper and tungsten are identified as clear bullish plays due to supply deficits. Hanke notes that high diesel prices are squeezing mining and agriculture, potentially raising output prices. He also touches on dollarization, recommending developing countries adopt the U.S. dollar to expand its use rather than de-dollarize.

The interview concludes with Hanke emphasizing the importance of money supply growth as the key determinant of nominal GDP and inflation.

Timestamps:
00:00:00 – Introduction
00:01:05 – Key Developments on Radar
00:04:58 – Oil Predictions vs Reality
00:10:53 – Inventory and Flow Analysis
00:14:40 – Crack Spreads and Refining
00:16:27 – Demand Destruction Dynamics
00:20:51 – Anticipated Oil Price Spike
00:22:32 – Long Oil Opportunity
00:27:37 – Gold Bull Market Outlook
00:29:38 – Central Bank Buying Drivers
00:45:54 – Concluding Thoughts

Guest Links:
X: https://x.com/steve_hanke
Website: https://thegoldsentimentreport.com
Amazon Book: https://www.amazon.com/Making-Money-Work-Rewrite-Financial/dp/1394257260
Amazon Book: https://www.amazon.com/Capital-Interest-Waiting-Controversies-Additions/dp/3031633970
E-Mail: mailto:hanke@jhu.edu

Steve H. Hanke is a Professor of Applied Economics and Founder & Co-Director of the Institute for Applied Economics, Global Health, and the Study of Business Enterprise at The Johns Hopkins University in Baltimore.

He is a Senior Fellow and Director of the Troubled Currencies Project at the Cato Institute in Washington, D.C., a Senior Advisor at the Renmin University of China’s International Monetary Research Institute in Beijing, a Special Counselor to the Center for Financial Stability in New York, a contributing editor at Central Banking in London, and a regular contributor to the Wall Street Journal’s Opinion pages. Prof. Hanke is also a member of the Charter Council of the Society of Economic Measurement and of Euromoney Country Risk’s Experts Panel.