Why could several commodities face headwinds in 2025?

Commodity prices are largely expected to decline in 2025 due to a sluggish global economic outlook and a rising dollar, but gold and gas prices may break the norm and rise this year, according to experts in these industries, as reported by the US network CNBC.

Mixed performance for commodities in 2024

The performance of commodities was mixed in 2024. While investors flocked to gold to hedge against inflation, commodity prices such as iron ore fell as China, the world’s largest consumer of metals, tried to confront tepid growth, and the story this year is likely to be the same.
“Commodities in general will be under pressure across the board in 2025,” said Sabrin Chaudhary, head of commodity analysis at research firm BMI, adding that the strength of the US dollar will limit demand for commodities denominated in the US currency.
Read also: Expectations of a slowdown in US economic growth in 2025 and an increase in inflation
Analysts are watching further Chinese stimulus in the hope that this will lead to a recovery in demand for basic goods in the world’s second-largest economy.

Oil price forecasts in 2025

Last year, crude oil prices fluctuated between rises and declines, easing from their peak prices by the end of the year due to weak Chinese demand and excess supply, while market observers expect prices to remain under pressure in 2025.
The Commonwealth Bank of Australia expects Brent crude prices to fall to $70 per barrel this year on average, amid expectations of an increase in oil supply from non-OPEC+ countries, which will exceed the rise in global oil consumption.
The price of Brent crude, the global benchmark, was trading at $76.34 per barrel, roughly the same level it reached a year ago in early January.

Gas continues to rise

Analysts at Citigroup said that global natural gas prices have risen since mid-December 2024, driven by cold weather and geopolitical conditions.
Read also:
The cessation of the flow of Russian gas to many European countries on the first day of the new year by Ukraine created a state of uncertainty in global gas markets, which the bank’s analysts say is that as long as the cessation of gas flow is in place, gas prices are likely to remain high.
Citigroup said cold weather during the rest of the winter in the United States and Asia may also keep prices high.
BMI expects gas prices to rise by about 40% in 2025 to $3.4 per million thermal units, compared to an average of $2.4 per million thermal units in 2024, driven by increasing demand from the liquefied natural gas sector.

Gold performance

Gold prices hit a series of historic highs last year and the series of new records could continue in 2025.
Adrian Ash, research director at Bullion Vault, a gold investment services company, said: “Investors are optimistic about gold and silver in 2025 because they are very pessimistic about geopolitics and government debt,” stressing the role of the yellow metal as a hedge against risks.
Gold posted its best annual performance in more than a decade last year.
Data from FactSet showed bullion prices rising by about 26% in 2024, driven by purchases from central banks and individual investors.

Silver and platinum prices

Silver, gold’s cousin, may also see prices rise, especially as demand for solar energy – silver is used to build solar panels – remains resilient and supply of the metal remains limited.
However, silver’s rise will depend on global industrial demand, which will be affected by Trump’s tariffs, precious metals trading services group MKS Pump wrote in its forecast report.

Copper demand concerns

Copper prices, which are an essential component in the manufacture of electric vehicles and power grids, may witness a decline after rising to a record level against the backdrop of the global energy transition.
“A potential slowdown in the energy transition amid Trump’s policy shifts may somewhat dampen the high sentiment that has supported prices in 2024,” BMI said.
While copper prices rose to a record high in May 2024, they have trended lower for the rest of the year and will continue to do so in 2025, according to John Gross, president of the metals management consulting firm of the same name.

Expectations of a decline in iron ore

Iron ore prices may also decline on the back of excess supply resulting from Chinese policies and geopolitical conditions.
Goldman Sachs said: “The expected US tariffs on China, the changing nature of Chinese stimulus, and new low-cost supplies will push the market into more surpluses,” expecting prices to fall to $95 per ton in 2025.

Cocoa and coffee prices

Cocoa and coffee prices stand out among the basket of soft commodities, reaching record highs in 2024 due to adverse weather conditions and supply shortages in key production areas, but demand may diminish in 2025.
“Since these commodities trade at levels well above the cost of production, we expect production to expand and demand to contract in the year,” researchers at Rabobank said.