As the global economy grapples with ongoing challenges, careful consideration must be paid to the behavior of key commodities entering the third quarter (Q3) of 2024.
Precious metals such as gold, silver, and copper have rallied so far this year, and many analysts believe the climb will continue.
Gold Price Forecast
In a note to clients this week, Nikos Tzabouras, a Senior Financial Editorial Writer at Tradu, said that with “two active military theatres, key elections ahead and uncertain global monetary policy, safe haven flows to Gold could continue.”
“Along with a buying spree from central banks of emerging economies, spearheaded by China and its de-dollarization push, prices can easily reach new records,” adds Tzabouras.
However, he cautions that the Fed’s reluctance to cut rates supports the greenback, and its strength also enhances its reserve currency appeal, eroding the ascending prospects of the yellow metal.
Is Oil Consumption Falling?
Tzabouras said oil consumption is expected to decelerate sharply this year, partly due to the push for net zero emissions and the proliferation of EVs.
“At the same time, supply is increasing, from non-OPEC countries like the US, which is poised for new records,” he notes. While this unfavorable mix pressured prices in Q2, Tzabouras feels that a rebound in the third quarter is likely.”
“The market could tighten over the following months due to the extension of the massive OPEC+ supply curbs,” he adds. “Furthermore, EV adoption is set to slow in 2024, fossil fuels remain important and the clean energy transition is facing challenges.”
Even so, despite the prospect of recovery, the $100 dollar scenario is “hard and such prices raise the risk of demand destruction,” states the Tradu senior financial editorial writer.
Copper Supply Expectations
Copper reached record highs this year. Despite the subsequent pullback, Tzabouras estimates that supply-demand dynamics are set to drive more gains.
“Consumption will increase further, as the metal is a vital component in the artificial intelligence revolution and the clean energy transition,” he writes. “At the same time, supply has tightened significantly, with major miners cutting their production targets for this year. There are risks to the favorable fundamentals, though, like China’s distressed property sector and the slowdown in EV adoption.”
Natural Gas Price Forecast
For natural gas, demand is expected to grow substantially this year. Tzabouras explains that this is largely due to industrial consumption from Asia.
“On the supply side, things are a bit murkier as major drillers have slashed their output targets,” he notes. “Natural gas rallied in the second quarter and the improved fundamentals can drive further upside.”
Tzabouras explains that the commodity is shielded from the adverse impacts of the shift away from fossil fuels since it is largely considered a bridge energy source.
Even so, he acknowledges that there are headwinds, such as Europe’s reduced usage and the historically warm weather.
“China is a prominent source of risk with its uneven recovery, while India’s growth may have peaked, and the diminished mandate of PM Modi creates some uncertainty,” adds Tzabouras.
Should Investors Focus on Commodities?
Nikos Tzabouras' commentary paints a complex picture for the commodities market in Q3. While some commodities like copper and natural gas seem poised for growth due to supply constraints and rising demand, others face headwinds. Oil, for instance, is caught between a potential rebound driven by production cuts and slowing demand due to the green energy transition.
Learn More About The Best Commodity Futures
Commodity futures serve to provide a way to hedge against inflation and diversify portfolios beyond traditional assets like stocks and bonds. These contracts allow for speculation on price movements of essential commodities, offering opportunities for significant returns. For example, the Metals Futures list in the investing.com Commodities section shows the futures prices and quotes for more than ten metals.