Investing.com – The macroeconomic challenges facing commodities in the first three quarters of 2024 have reversed and become tailwinds entering the new year, according to analysts at Investing.com. Wells Fargo (New York Stock Exchange:).
Rising interest rates and broader economic uncertainties weighed on commodity prices during the January-September period last year, although that trend largely turned around in the fourth quarter, analysts led by Mason Mendes said in a note to clients published on Monday.
They said that commodities overall provided a modest performance in 2024, with Bloomberg commodities the total (EPA:) The yield index posted a 4.5% year-to-date increase as of December 26.
“While supply conditions remained supportive of higher prices, demand for commodities eased due to global economic headwinds,” the analysts wrote.
This tepid demand is expected to improve in 2025, becoming a potential spark for an uptick in commodity prices, they added. However, they noted that the supply side “should not be forgotten.”
“After two years of lackluster commodity prices, many commodity producers have slowed production growth,” analysts said. “This could become a particularly acute point in 2025 if demand recovers at a stronger pace than most people expect.”
They noted that production of new commodities often lags behind demand “by months, sometimes years.”
Among individual sectors, analysts said they are more keen on precious metals, such as energy, with both expected to rise at least 10% in 2025. This would exceed the return that analysts expect from the midpoint of the 250-270 target range for the Bloomberg Total Return Index. For broader goods.
Gold, in particular, had a turbulent end to 2024 due in part to caution about further interest rate cuts by the Fed, which contributed to higher nominal and real bond yields that dampened the appeal of non-yielding bullion.
However, the yellow metal jumped about 27% annually to close the year at $2,625 an ounce, and the prospect of further Fed rate cuts – albeit at a slower pace – could continue to enhance its appeal, Wells Fargo reported. Analysts said.
They have set a target range for gold prices of $2,700-$2,800 per ounce this year.
Meanwhile, energy is expected to benefit from increased demand as global economic conditions improve, analysts predict. Its price is expected to range between $85 and $95 per barrel, while the price of crude oil is expected to range between $90 and $100 per barrel. Oil prices fell by about 3% in 2024, partly affected by the slow recovery in global demand after the pandemic.
