Investing.com – Macroeconomic challenges facing commodities in the first three quarters of 2024 have reversed and become headwinds heading into the new year, analysts say Wells Fargo (NYSE:).
High interest rates and broader economic uncertainty weighed on commodity prices between January and September last year, although that trend largely reversed in the fourth quarter, analysts led by Mason Mendez said in a note to clients on Monday.
Commodities generally underperformed in 2024, they said, with Bloomberg Commodity In total (EPA:) The return index recorded a growth of 4.5% from the beginning of the year to December 26.
“While supply conditions continued to support higher prices, demand for commodities was constrained by global economic headwinds,” the analysts wrote.
That tepid demand is forecast to improve in 2025, becoming a possible spark to push commodity prices higher, they added. However, they emphasized that the offer “must not be forgotten”.
“After two years of weak 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 faster pace than most expect.”
They noted that new commodity production often lags behind demand by “months and sometimes years.”
Among individual sectors, analysts say they are most interested in precious metals, such as , and energy, with both expected to gain at least 10% in 2025. That would exceed the return analysts expect from the middle of their 250-270 target range for the broader Bloomberg Total Commodity Return Index.
In particular, gold saw a turbulent end to 2024 in part due to caution over further Federal Reserve rate cuts, which contributed to a rise in nominal and real bond yields that reduced the appeal of zero-yield bullion.
Still, the yellow metal jumped about 27% year-to-date to close the year at $2,625 a troy ounce, and the prospect of further Fed rate cuts — albeit perhaps at a slower pace — could continue to boost its appeal, Wells Fargo said. analysts.
They set a gold price target range of $2,700-$2,800 per troy ounce this year.
Meanwhile, energy is forecast to benefit from higher demand as global economic conditions improve, analysts predict. it is predicted to be between 85-95 dollars per barrel, while crude oil is estimated at 90-100 dollars per barrel. Oil prices fell by about 3% in 2024, weighed down in part by a slow recovery in global demand after the pandemic.
