Investing.com – The macroeconomic challenges facing commodities during the first three quarters of 2024 have reversed, providing a tailwind heading into the new year, analysts say. wells fargo (NYSE:).
Rising interest rates and broader economic uncertainty weighed on commodity prices during the January-September period last year, but that trend reversed significantly in the fourth quarter, analysts led by Mason Mendez said in a note to clients published Monday.
Commodities overall performed modestly in 2024, they said. Bloomberg Commodities gun (EPA:) The yield index was up 4.5% year-to-date as of December 26.
“While supply conditions remain supportive of rising prices, demand for raw materials has been subdued by global economic headwinds,” the analysts wrote.
This tepid demand is likely to improve in 2025 and could be the spark that could spark a rise in commodity prices, they added. However, he pointed out that the supply side “should not be forgotten.”
“After two years of sluggish 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 rate than most expect.”
They noted that production of new raw materials often lags demand by “months, sometimes years.”
Among individual sectors, analysts say they are most interested in precious metals and energy, both of which are expected to rise at least 10% in 2025. That would exceed the returns analysts expect in the mid-250s. The target range for the broader Bloomberg Commodity Total Return Index is 270.
Gold in particular experienced a turbulent end to 2024, in part due to warnings of further interest rate cuts from the Federal Reserve, which contributed to a rise in nominal and real bond yields that undermined the appeal of non-yielding bullion.
Still, the yellow metal surged about 27% year-to-date to end the year at $2,625 per troy ounce, and the prospect of further interest rate cuts from the Federal Reserve, albeit at a slower pace, could continue to boost its appeal, Wells Fargo said. analysts said.
They set a gold price target range of $2,700 to $2,800 per troy ounce this year.
Meanwhile, energy is expected to benefit from increased demand as global economic conditions improve, analysts predicted. Oil prices are expected to be between $85 and $95 per barrel, and crude oil is expected to be between $90 and $100 per barrel. Oil prices fell about 3% in 2024, partly due to the sluggish recovery in global demand following the pandemic.
