The year 2024 proved significant for commodities, with the Bloomberg Commodity Total Return Index ending the year about 4% higher, recovering from the nearly 7% decline recorded in 2023. Precious metals were the standout performers within the complex, with gold leading the gains. Despite potential uncertainties surrounding U.S. and Chinese economic and trade policies, the outlook for the current year remains broadly positive for commodities, with precious metals expected to continue their strong performance.

Prospects for 2025: Precious Metals Set to Shine Brighter

In 2024, international gold prices climbed nearly 27% year-on-year to a record $2,800 per troy ounce, supported by strong central bank purchases, increased ETF demand, and interest rate cuts by major central banks, while geopolitical tensions in the Middle East and Europe bolstered gold’s appeal as a safe haven.

With newly elected US President takes charge in January 2025, the outlook for gold could prove intriguing. The tariffs and immigration policies are expected to be inflationary, while tax cuts could spark an economic boom, limiting the Federal Reserve's ability to reduce interest rates, at least early in the year. However, as rising debt levels and the economic strain from tariffs begin to take their toll on the dollar, gold would be poised to find support and rally once again towards fresh highs close to $3000 per troy ounce.

Silver prices also surged by 25% in 2024, driven by increased ETF demand, which reached its highest level since 2021 at 18 million ounces. The silver market recorded a 182-million-ounce deficit, its fourth year of shortages, driven by record industrial demand surpassing 700 million ounces and constrained supply. The deficit is expected to continue, supported by growing demand in green technology and artificial intelligence. Much like gold, silver prices are likely to find stronger support later in the year, driven by China’s fiscal stimulus and a potential weakening of the U.S. dollar.

Crude Oil: Political and Economic Crosswinds Ahead

Crude oil prices in 2024 exhibited mixed trends, with a sharp rise in the first half driven by geopolitical tensions in Ukraine and the Middle East, followed by a stabilization in the $65-$80 range during the second half as supply concerns eased. Weak demand from China and the limited impact of OPEC+ output cuts, contributed to the moderation in prices.

Looking forward, increased production from non-OPEC countries and modest oil demand growth suggests a potential supply surplus in 2025. Global oil demand is expected to rise by 1.2 mbpd, but this may not be enough to absorb the 1.5 mbpd increase in non-OPEC+ supply, mainly from the U.S., Brazil, Canada, and Guyana.

The return of U.S. President (2nd term) in 2025 introduces added uncertainty. His trade policies toward China, the EU, and Canada could disrupt global trade, economic growth, and oil demand. His anti-war stance may also lower geopolitical risks, keeping WTI crude oil prices under pressure in the $55-$80 range, at least in the first half of the year. Meanwhile, demand from China remains a key factor. If the Chinese government’s plan to increase its budget deficit to 4% of GDP materializes, it could boost oil demand towards the year end. We expect crude oil prices to trade within a relatively narrow range of $55-$85 for the year, driven by mixed fundamentals.

Base Metals: Copper Emerges as the Top Pick

Base metals recorded strong performances in 2024, with copper, aluminium, and zinc posting notable gains. Copper climbed to record highs of nearly $11,000/ton on the LME before easing back yet ended the year positively. Zinc and aluminium also saw sizeable gains, with zinc recovering from the steep losses experienced in 2023.

Copper is expected to lead the base metals again this year. While tariff-related concerns may create a slow start, ongoing efforts by China to revitalize its economy are likely to support demand for the red metal in the long run. A recovery in demand, coupled with a smaller supply surplus of just 0.19 million tons, compared to 0.47 million tons in 2024, due to reduced concentrate availability from key regions like Peru, Chile, and Panama, positions copper favourably. Additionally, the eventual weakness in the U.S. dollar further strengthens the investment case for copper.