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'Chronic under investment' - Tavi Costa on why commodities are headed higher

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(Kitco News) - Tavi Costa, macro strategist at Crescat Capital, is a contrarian when it comes to the market's expectation of Federal Reserve rate cuts.

Costa spoke to Kitco mid-September at the Precious Metals Summit 2023 held in Beaver Creek, Colorado.

"I don't think we're going to see four to five rate cuts in a year out," said Costa. "I actually think we're probably going to see even a slight increase in rates potentially because of this re-emergence of inflation," he added, referencing higher commodity prices including metals, oil and lumber.

He pointed to four "pillars of inflation" that didn't exist previously: de-globalization, inequality, chronic under-investment in natural resources, and reckless fiscal spending.

"Unless you go back to the war period, all of that is highly inflationary," Costa said, adding "it's hard to believe we're going to go back to the Fed's [2% inflation] target anytime soon."

Asked whether China's problems are putting a damper on commodities demand, Costa noted that demand is also coming from the G7 countries.

"Regardless if it is the US, Canada, Europe, Australia, all those places are starting to build up infrastructure to reduce reliability with places like China. I think that's huge, we're not talking enough about that," he said, offering non-residential spending on construction in the US as an example.

"It looks like the chart of Nvidia, it's going straight up and so that has to reflect...the demand for materials, and the materials come from commodities."

Kitco Mining's coverage of the Precious Metals Summit 2023 was sponsored by Newcore Gold.

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