Almost all commodities are likely to face pressure this year!
Industry experts predict that due to weak global economic prospects and a rebound in the US dollar, commodity prices are expected to decline in 2025, but gold and natural gas prices are projected to rise this year.
The performance of the commodity market in 2024 has been mixed: while investors flocked to gold as a hedge against inflation, prices for commodities like iron ore fell as growth in the world's largest metal consumer slowed. This year may see a similar trend.
Sabrin Chowdhury, Head of Commodities Analysis at BMI, stated, 'In 2025, all commodities will face pressure,' adding that a stronger US dollar will limit demand for dollar-denominated commodities.
Last year, crude oil prices were dragged down by weak demand in Asia and oversupply. Market observers expect oil prices to remain under pressure in 2025.
The International Energy Agency (IEA) painted a bearish picture of the oil market in November, predicting that global oil demand growth would fall below 1 million barrels per day in 2025, compared to 2 million barrels per day in 2023.
The Commonwealth Bank of Australia expects Brent crude prices to drop to $70 per barrel this year due to increased oil supply from non-OPEC+ countries outpacing global oil consumption growth.
BMI noted in its December report that a supply surplus could emerge in the first half of 2025 due to significant new capacity coming online in the US, Canada, Guyana, and Brazil. Additionally, if OPEC+ plans to roll back voluntary production cuts, the surplus could further weigh on prices.
BMI pointed out that the demand outlook for 2025 remains uncertain. 'Global oil and gas demand is still unclear, with steady economic growth and rising fuel demand offset by the impact of trade wars, inflation, and shrinking demand in developed markets.'
The global crude benchmark, Brent crude, was last trading at $76.34 per barrel, roughly the same level as in early January last year.
Citigroup analysts noted that global natural gas prices have been rising since mid-December 2024 due to cold weather and geopolitical factors.
Ukraine's suspension of Russian gas supplies to several European countries on the first day of this year has added further uncertainty to the global gas market. As long as the disruption continues, natural gas prices are likely to remain high.
Citigroup stated that cold weather in the US and Asia during the remainder of the winter could also keep prices elevated.
BMI predicts that natural gas prices will rise by about 40% in 2025, reaching 3.4permillionBritishthermalunits(MMBtu),comparedtoanaverageof3.4permillionBritishthermalunits(MMBtu),comparedtoanaverageof2.4/MMBtu in 2024, driven by growing demand in the liquefied natural gas (LNG) industry and increased net pipeline exports.
The US Henry Hub natural gas price, mentioned by BMI, is currently at $2.95/MMBtu. BMI analysts wrote, 'LNG will continue to drive new consumption, supported by rising export capacity and strong demand in Europe and Asia.'
Gold prices hit a series of record highs last year, and this rally could extend into 2025.
Adrian Ash, Research Director at BullionVault, said, 'Investors are optimistic about gold and silver in 2025 because they are so pessimistic about geopolitics and government debt,' highlighting gold's role as a risk hedge.
JPMorgan analysts also expect gold prices to rise, especially if US policies become 'more destructive,' such as increased tariffs, heightened trade tensions, and greater risks to economic growth.
Gold had its best annual performance in over a decade last year. FactSet data shows that gold prices rose about 26% in 2024, driven by purchases from central banks and retail investors.
BullionVault and JPMorgan predict that gold prices will rise to $3,000 per ounce in 2025.
Additionally, gold's 'poor cousin,' silver, may also see price gains, especially as demand for solar energy (silver is used in solar panel manufacturing) remains strong and metal supplies remain limited.
JPMorgan analysts noted, 'Both silver and platinum have strong underlying supply shortage fundamentals. We believe that once base metals find a firmer footing, a catch-up trade later in 2025 could be very strong.'
Juerg Kiener, Chief Investment Officer at Swiss Asia Capital, stated that silver is primarily used in industrial applications, often in the production of automobiles, solar panels, jewelry, and electronics. It is also needed for building AI products and has military applications.
The precious metals trading service group MKS Pamp wrote in an outlook report that silver's rise will depend on global industrial demand, which will be influenced by Trump's tariffs.
Copper, a critical metal for electric vehicles and power grids, may face a decline after surging to record highs this year due to the global energy transition.
BMI wrote in a report, 'A slowdown in the energy transition could occur amid Trump's policy shifts, which may somewhat dampen the 'green sentiment' that supported prices in 2024.'
John Gross, President of metal management consultancy John Gross and Company, said that while copper prices hit record highs in May 2024 due to tight market supply, they have been declining for the rest of the year and will continue to fall.
The veteran metal market expert stated that a mix of high inflation, high interest rates, and a strong US dollar will weigh on all metal markets.
6.Cocoa and Coffee
Last year, cocoa and coffee prices stood out, with both climbing to record highs in 2024 due to adverse weather conditions and tight supplies in major producing regions. However, demand for cocoa and coffee may decline in 2025.
Researchers at Rabobank said, 'Given that these commodities are trading well above production costs, we expect production to expand and demand to shrink next year.'
