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By Nicholas Larsen, International Banker
It was a decidedly mixed performance for the commodities complex in 2024. While some assets, such as gold, silver and cocoa, scaled impressive highs, other important commodity products ended the year in the red, most notably coal, lithium and soybeans. And with the likelihood of further declines in interest rates, the commencement of the Trump 2.0 presidency and a potential powder keg of geopolitical flare-ups ready to be unleashed, 2025 could prove hugely significant for commodities’ prices.
According to Fitch Solutions’ company BMI (BMI Country Risk and Industry Analysis), 16 out of 27 of the most liquid and valuable commodity markets (59 percent) will average lower in 2025 than they did last year. “We project our proprietary Aggregate Commodity Price Index (an equal-weighted index of annual averages of the main commodities we forecast across energy, metals and agriculture) to decline by 1 percent in 2025, following a 2 percent year-on-year growth expected in 2024 and 14 percent year-on-year decline in 2023,” the research firm stated in a report published on December 12.
BMI also cited key downside risks, such as slowing global economic growth, the deteriorating US-China relationship and conflicts in the Middle East and Ukraine as chief contributory factors. A stronger dollar may also weigh heavily on commodities across the board, with dollar-denominated assets becoming more expensive for international buyers. The greenback enjoyed a strong rally throughout the fourth quarter of 2024.
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Such downside risks may prove most influential in the energy sector. According to the U.S. Energy Information Administration (EIA), the US benchmark Henry Hub Natural Gas Spot Price averaged $2.21 per metric million British thermal units (MMBtu) in 2024, which was the lowest average annual price in inflation-adjusted dollars ever reported. This average gas spot price was 16 percent lower than the 2023 average and a hefty 68 percent lower than its 2022 average and thus represented the largest two-year decline on record, as the US natural gas market entered the winter of 2024–25 with the highest volume of natural gas in storage since 2016. According to the EIA, “robust US natural gas supply and constraints on demand reduced prices for most of 2024”.
BMI predicted US natural gas prices would trend higher in 2025, however. “We forecast the front month Henry Hub gas benchmark to post growth of 42 percent in 2025, rising to $3.4/mmbtu,” the research firm added. “Despite gas in storage remaining highly elevated and below-trend growth in gas consumption of 1.4 percent, we expect global demand for LNG to support higher prices. The developing La Niña conditions [are] expected to fuel a colder than normal Norther[n] Hemisphere winter, which should support natural gas prices both in the US and abroad.”
Oil prices were much more rangebound, however, with the market being tempered by weak demand for crude from China and markets being well supplied. Brent crude oil futures prices averaged $80 per barrel last year, just $2 less than in 2023. As for 2025, the International Energy Agency (IEA) modestly revised its forecast for global oil-demand growth in December to 1.1 million barrels per day (bpd) from the 990,000 bpd it estimated in November. The agency attributed this increase largely to an improved picture from Asian countries “due to the impact of China’s recent stimulus measures”.
Whether oil prices will be higher this year as a result remains unclear, however. According to BMI, demand for global oil and gas is “uncertain, with stable economic growth and rising fuel demand offset by trade war impacts, inflation and contracting demand in developed markets”. BMI also stated in a December report that the first half of 2025 could see oil markets experience supply gluts as substantial new sources of production from the United States, Canada, Guyana and Brazil come online during this period.
The IEA similarly predicted a well-supplied oil market in 2025, with global supply expected to overshoot demand by 950,000 bpd—or nearly 1 percent of global supply—and rising to 1.4 million bpd if OPEC+ (Organization of the Petroleum Exporting Countries+)proceeds with its plan to cut output from the end of March. The agency also projected that non-OPEC+ oil-producing nations would bolster supply by about 1.5 million bpd this year, which would outpace growth in oil demand. “The relatively subdued pace of global oil demand growth is set to continue in 2025, accelerating only modestly,” the IEA wrote in its December report, adding that the market was “looking comfortably supplied”. As such, 2025 could see oil prices trending lower across the 12 months.
Indeed, J.P. Morgan Research forecasted oil to remain subdued in 2025 as the market experiences a growing supply surplus. “We look for a large 1.3 million barrels per day (mbd) surplus and an average of $73 per barrel (bbl) for Brent, although we expect prices to close the year firmly below $70, with WTI at $64/bbl,” said Natasha Kaneva, the US bank’s head of global commodities strategy, assuming that OPEC+ production remains at existing levels.
The 2025 outlook for coal remains surprisingly bullish, however, with the buoyant demand for the controversial fossil fuel in 2023 and 2024 expected to continue this year. “Despite renewables installations consistently hitting new record levels, global coal demand has continued to grow, hitting new records in both 2023 and 2024,” S&P Global Commodity Insights noted on December 11, adding that coal-fired power generation hit record highs both years despite the massive gains made by the country in wind and solar installations. “Strong electricity load growth, aided by rapidly expanding power demand for data-centres and EV charging, ha[s] surpassed the tremendous growth in renewables, increasing the call on fossil fuels.”
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Meanwhile, the highs achieved by precious metals last year—an all-time record for gold of around $2,790 per ounce in late October and a 12-year high for silver of almost $35 per ounce—are widely expected to be eclipsed in 2025. With central banks led by the People’s Bank of China (PBC) likely to continue buying large volumes of gold this year to diversify their reserves and investors choosing to grow their exposures to safe-haven assets amid heightened geopolitical risks—for example, the expected renewal of the US-China trade war under US President Donald Trump’s second administration—precious-metal prices will be buoyed by strong demand during 2025.
“We maintain our multi-year bullish outlook on gold as the most likely macro scenarios in 2025 still skew bullish for the metal,” said Gregory Shearer, head of base and precious metals strategy at J.P. Morgan. “We are forecasting prices to rise towards $3,000/oz next year.” As for silver, Shearer predicted a price rally once base metals find their market bottom in early 2025. “We see a catchup trade propelling silver prices toward $38/oz by year-end.”
Appearing slightly less bullish, Goldman Sachs stated it expected gold to reach $2,910 per ounce by the end of 2025, in part due to less robust demand for gold ETFs (exchange-traded funds) amid greater market uncertainty prompted by a second Trump administration. “Lower speculative demand and higher central bank buying have offset each other, keeping gold prices range-bound,” the US bank wrote in a note. Nonetheless, with Goldman projecting an 11-percent surge in 2025 for the S&P GSCI benchmark commodity index and with gold a chief contributor to this bullish outlook, the yellow metal is expected to be a standout performer within the commodities complex this year.
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Not all metals are expected to thrive, however. On the base-metals front, for instance, the 2025 copper price could extend its decline after reaching record highs above $5.10 per pound in May 2024. The start of the year saw copper futures prices trading just below $4 per pound, and some analysts have anticipated further losses transpiring over the coming months as the bellwether metal, a key component in the manufacturing of electric vehicles and power grids, comes under pressure from a less sustainability-minded Trump administration.
“A potential deceleration in energy transition amid Trump’s policy shifts might dampen, to some extent, the ‘green sentiment’ that bolstered prices in 2024,” BMI noted. John Gross, president of the metals-management consultancy John E. Gross and Company, told CNBC on January 6 that the high inflation, elevated interest rates and stronger dollar that are all likely to feature in 2025 will also weigh on all metals markets. Gross expected copper prices to continue their downward trajectory in the second half of 2025.
That said, Goldman Sachs predicted the growing sales of new electric vehicles (EVs) would be a crucial source of demand for copper in China, which, in turn, should push prices higher this year. The US bank forecasted copper prices averaging $4.61 per pound in 2025, while Morgan Stanley projected prices to climb to $4.31 per pound by the end of the year.
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A largely underwhelming outlook for agricultural commodities in 2025 remains on the horizon, especially if global trade hostilities flare up under Trump, inducing retaliatory protectionist measures from China targeting US grain exports. Cocoa and coffee prices may also experience declines, having reached record highs last year on the back of adverse weather conditions in key producing regions, with demand likely to cool this year.
“Given that these commodities are trading at levels well above [the] cost of production, we expect production to expand and demand to contract in the coming year,” according to Rabobank, which published its “Agri Commodity Markets Research Outlook 2025” on December 11. “Additionally, greater certainty on the implementation of the EU Deforestation Regulation by the end of 2024 should bring relief to these markets. While a drop in commodity prices is expected, prices paid by consumers will continue to increase as higher costs continue to be passed along the supply chain to consumers.”
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