After Trump’s victory late last year, commodities began to weaken. Even gold, which had an exceptional year, started losing value as the dollar strengthened. These turbulences in the last quarter of 2024 have filled investment firms’ outlooks for commodities with both light and shadow, and, above all, with highly diverse interpretations.
For example, Bank of America expects commodity prices, including oil, to decline. According to Francisco Blanch, Head of Commodities and Derivatives Research, the demand growth for commodities will weaken: “Macroeconomic fundamentals suggest that in 2025, markets will be oversupplied with oil and grains but more balanced in the case of metals. After facing headwinds early in the year, gold should reach a high of $3,000 per ounce.”
In its outlook, the institution explains that the risks of a global trade war, combined with a strong U.S. dollar and higher terminal rates, create a bearish scenario for commodity returns. “Fundamentals point to lower prices for oil, grains, and metals in the first half of 2025, but the outlook could improve with stimulus in China or trade agreements. Negative macroeconomic shocks (tariffs, higher rates) or positive ones (trade, fiscal, or peace agreements) could increase correlations between asset classes in 2025,” Bank of America emphasizes.
Ofi Invest, for its part, believes that the roughly 10% correction in industrial and precious metal prices following Trump’s victory was a one-off event caused by a strong dollar. Despite this “setback,” it considers that nothing has changed the medium-term structural drivers for metals: the energy transition and high levels of debt. The asset manager believes that these two trends will once again support rising metal prices, given the structural imbalances in both supply and demand.
“The short-term rebound in the dollar is not the most relevant factor for gold. Debt issues and the emerging distrust in the dollar are structural and persistent problems that have a greater impact on gold prices. Additionally, the price of metals will benefit from shifts in consumption due to the energy and digital transition. In short, the structural drivers of metals, led by the energy and digital transitions, should soon support rising metal prices, given the current supply and demand imbalances,” explains Ofi Invest.
On the other hand, Macquarie holds that, given its economists’ global GDP growth forecast of 3% for 2025, with sequential acceleration in the first half, commodity prices should find some support against the current headwind of a strong U.S. dollar. That said, they note that the prospect of a stronger tailwind, with a notable acceleration in global industrial production, has diminished. “In fact, the negative implications for goods demand from a trade war threaten the recovery potential for manufacturing relative to services. The possibility that commodity demand will receive a boost from manufacturing restocking in developed markets is also limited by the negative confidence impact of a trade war and by our reduced expectations for Federal Reserve rate cuts,” they explain.
Headwinds
According to Macquarie’s outlook, in their baseline scenario, the incremental implementation of both U.S. tariffs and Chinese policy easing will likely result in comparatively slow price action. “Without something to drive real demand growth or a narrative to reinvigorate financial flows, fundamentally oversupplied markets will likely see most prices trend downward over the next 18 months, interspersed with headline-driven volatility and the possibility of regional mismatches,” they explain.
Additionally, they warn of a wide range of associated risks, heavily dependent on whether any trade agreements are reached. In their outlook document, they indicate that the most volatile alternative scenario would undoubtedly be one in which the incoming Trump administration adopts a maximalist approach to tariff implementation. This could lead to increased financial risk and real demand destruction for industrial commodities, only to be followed by a much more robust and likely commodity-intensive stimulus package from the Chinese government.
Growth Trends
“Apart from cyclical uncertainties, the pace of the energy transition remains the key factor we expect to determine global final demand growth trends. Given the absence of commodity demand growth from the ‘old economy’ in developed markets over the last two decades, we remain skeptical about its potential as a future growth driver. Furthermore, the argument that the energy transition is already being perceived as a demand differentiator is underscored by the assessment that global electric vehicle (EV) production should account for approximately 40% of net copper demand growth in 2024. At the same time, strong EV sales in China should mean that fleet penetration rates are now sufficient for refined oil demand for road transportation in the country to have peaked,” adds Macquarie.
Their conclusion is that not only will the pace of these developments vary over time, but the degree to which financial markets price them in will likely exacerbate these changes. “In light of this, as well as the reflexivity of commodity markets, periods of excessive price strength will likely offset the potential for future fundamental tightening by incentivizing primary and secondary supply growth, as well as demand destruction. Conversely, any period of excessive price weakness—such as from a trade war—will add to the potential for medium-term shortages,” concludes Macquarie’s outlook document.
