Commodities 2025 outlook

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Executive summary │ Commodities 2025 outlook

Stay selective, hedge Trump-induced tail risks

Hedge tail risks with volatility abound

Stay selective across the complex

Top trades

• The sweeping pivots in US trade, energy, fiscal and immigration policies in a governing trifecta Trump 2.0 mandate, are inflationary. Commodities act as a critical inflation hedge as physical assets historically deliver strong real returns when inflation rises, while equity and bond real returns tend to be negative. This fortifies the diversification play commodities offer portfolio allocations across three central Trump-induced inflation shocks – (1) positive demand shock; (2) negative supply shock; and (3) shocks spurred by central bank credibility loss / geopolitics.

• We recommend a selective commodities bias in 2025 given differentiation in fundamentals:

  • Energy (neutral-to-bearish). For oil, an unresolved surplus and high spare capacity is bearish but, two-tail risks of breakouts in our USD65-80/b corridor on Trump-induced tariffs and/or geopolitical uncertainty, are tangible. For natural gas, delays to the ramp  up of US LNG supply projects have pushed out our lower US/EU gas prices to 2026.

  • Base metals (neutral-bullish). Sideways near-term on tariff risk premiums (sticks) before bullish reactive Chinese stimulus (carrots) and structural green transition demand arrives.

  • Precious metals (bullish). Gold’s unshakable bull market remains our most constructive conviction for the second consecutive year, reinforced by a combination of “fear” (geopolitical hedge of first resort) and “wealth” (EM central bank demand) dimensions.

  • Agriculture (neutral). US trade, foreign policy, wider geopolitical developments and an uncertain La Niña to amplify volatility but a low inventory base caps downside price risks.

• Based on our selective 2025 commodities conviction, we advocate three trades:

  • Long gold – “fear” and “wealth” dimensions offer compelling entry for our long gold call.

  • Long/short oil – upside on low valuations/Iran supply risks; downside on high spare capacity.

  • Short gas – upcoming mega-supply wave of LNG supply drive prices below lignite economics.