Investing.com – The macroeconomic challenges facing commodities in the first three quarters of 2024 have reversed and become tailwinds heading into the new year, according to analysts at Wells Fargo (NYSE:).
High interest rates and broader economic uncertainties weighed on commodity prices between January and September last year, although that trend largely reversed in the fourth quarter, analysts led by Mason said Mendez in a note to clients issued Monday.
Commodities in general performed modestly in 2024, they said, with the Bloomberg Commodity Index Total (EPA:) The performance index recorded an increase of 4.5% since the start of the year as of December 26.
“While supply conditions remained favorable for higher prices, demand for raw materials was dampened by global economic headwinds,” the analysts write.
This lukewarm demand is expected to improve in 2025, becoming a possible spark that would ignite higher commodity prices, they added. They stressed, however, that the offer “should not be forgotten.”
“After two years of sluggish commodity prices, many commodity producers have slowed production growth,” the analysts said. “This could become a particularly acute point in 2025 in the event that demand recovers at a faster pace than expected.”
They noted that production of new raw materials often lags demand “by months or even years.”
Among individual sectors, analysts said they were most interested in precious metals, such as silver and energy, with both expected to gain at least 10% in 2025. This would exceed the return analysts expected to halfway through their 250-270 for the broader Bloomberg Commodity Total Return Index.
Gold, in particular, had a turbulent end to the year in part due to caution over further interest rate cuts from the Federal Reserve, which contributed to a rise in nominal and real bond yields , which hurt the appeal of non-yielding bullion.
Still, the yellow metal surged about 27% annually to close the year at $2,625 per troy ounce, and the prospect of further Fed rate cuts – albeit at a perhaps slower pace – could continue to strengthen its appeal, according to the Wells Fargo agency. » said the analysts.
They set a target range for gold prices between $2,700 and $2,800 per troy ounce this year.
Energy, meanwhile, is expected to benefit from increased demand as global economic conditions improve, analysts predict. is expected to be between $85 and $95 per barrel, while crude is expected to be between $90 and $100 per barrel. Oil prices fell about 3% in 2024, weighed down in part by a slow post-pandemic recovery in global demand.
