Quarterly Outlook
Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?
John J. Hardy
Global Head of Macro Strategy
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Commodities weekly: High-flying precious metal sees profit taking
Ole Hansen
Head of Commodity Strategy
Key points in this update:
- Growing uncertainty about the global economic outlook has been felt across the commodities market, where different sectors have responded in varying ways.
- Despite economic risks, the commodities sector has emerged as one of the best-performing asset classes in 2025.
- While coffee and sugar recorded strong gains, performances were relatively muted across other sectors, with end-of-week profit-taking reducing earlier strong gains.
- Led by a silver and platinum slump, gold traded lower, with profit-taking emerging ahead of a multi-year technical resistance level.
Growing uncertainty about the global economic outlook, including inflation trends and political developments, has prompted several major central banks to strike a cautious tone in their latest policy meetings. Of the five central banks that convened to decide on interest rates this past week, only the Swiss National Bank opted to lower rates, reflecting concerns about sluggish growth and subdued inflation. Meanwhile, traders anticipate further rate cuts in both the US and the UK later this year, while Japan remains on a tightening path as inflation has surpassed the Bank of Japan’s 2% target for the 35th consecutive month.
In the US, the Federal Reserve maintained its benchmark interest rate for the third consecutive meeting, keeping its forecast for two rate cuts in 2025 unchanged. However, Fed Chair Powell cautioned that economic uncertainty remains “unusually elevated,” largely due to President Trump’s aggressive trade policies, including sweeping import tariffs. These measures, intended to support domestic manufacturing by making foreign goods more expensive, have instead contributed to inflationary pressures and a slowing economy, raising growth concerns.
The impact of these economic policies has been felt across the commodities market, where different sectors have responded in varying ways. The energy market has softened as global demand concerns weigh on crude oil prices, while US grain prices have come under pressure due to retaliatory trade measures from China, which has restricted imports of American agricultural products. In contrast, industrial metals have seen significant gains, driven by a combination of a tariff-disrupted New York futures market—affecting silver and copper prices—and a surge in investor demand for safe-haven assets like gold.
Despite some of these economic risks, the commodities sector has emerged as one of the best-performing asset classes in 2025. Exchange-traded funds (ETFs) tracking the Bloomberg Commodities Total Return Index have delivered gains around 8%, significantly outperforming the MSCI World Index, which has remained flat. In comparison, major US stock indices have suffered steep losses, with institutional investors selling off US equities at the fastest rate on record, according to a weekly survey from BofA Securities.
This shift in investor sentiment has also fuelled increased demand for government bonds and led to a notable reallocation of capital toward Asian and European equities. European stocks, in particular, have benefited from speculation that Germany’s unprecedented fiscal stimulus—focused on infrastructure and defence—could provide a much-needed boost to the region’s economy. Additionally, persistent worries about US stagflation and the ongoing selloff in American stocks have strengthened demand for gold, as evidenced by a USD 10 billion influx into gold ETFs over the past month.
Overall, the Bloomberg Commodities Total Return Index (BCOMTR) traded higher for a third week, but apart from softs where coffee and sugar recorded strong gains, performances were relatively muted across other sectors with end-of-week profit-taking reducing earlier strong gains, especially across the precious metal sectors lead by a slump in silver. The index, as mentioned, trades up around 8% on the year, thereby cementing its position as one of the best-performing asset classes in 2025. Except for grains, which have suffered a rush of speculative long liquidation worsened by uncertainty over what will happen with tariffs after 2 April, all sectors trade up on the year with standout performances from precious and industrial metals as well as the softs sector.
On an individual level, the top five contracts are natural gas (+30%), HG copper and Arabica coffee both on 25%, followed by silver and gold, both up around 14%. At the bottom, we find cocoa (-33%) and EU gas (-12%), two contracts that are not included in the BCOMTR Index, while smaller losses have been recorded in crude and fuel as well as cotton.
Sugar’s roller-coaster ride leaves traders with a bitter taste
The most active raw sugar futures contract in New York has rallied back to 20 cents per pound, a level it traded at three weeks ago, before witnessing a sudden 10% correction, partly driven by wrong-footed speculators who have struggled to deal with the roller-coaster ride the sweetener has been on since December. Including the positive roll yield from a backwardated forward curve, the contract trades up around 13% so far this year, and together with a 27% increase in Arabica coffee, they have supported a strong quarter for the Bloomberg Commodity Softs TR Index, which currently trades up around 15%, a performance that has only been eclipsed by precious metals.
The latest rebound is being supported by the prospect of tightening fundamentals with concerns emerging about export levels from Brazil and India, the world’s top growers. Production estimates in Brazil are being lowered following a period of dry weather, while lower cane yields in some key growing areas in India may challenge its capacity to keep exports going. In addition, shipments of sugar to the US from Mexico are expected to fall to a 17-year low this year, with exports being challenged by lower production following an extended period of drought and now also the risk of a 25% tariff on goods otherwise covered under the North American trade agreement.
Silver-led profit-taking weighing on gold
Gold reached a fresh record high above USD 3,050 an ounce before some end-of-week profit-taking, led by silver and platinum, helped trigger another, so far shallow, correction. The recent rally has pushed the price of a standard 400-ounce (12.4 kg) gold bar—held by central banks globally—above USD 1,200,000, a tenfold increase since the start of the 21st century. Beyond reinforcing gold’s status as a long-term buy-and-hold asset, this surge reflects growing global instability, which has fuelled strong demand for safe havens like gold and, to some extent, also silver.
Since the November 2022 low, gold has rallied by around 80%—a phenomenal performance by an asset often criticised by Warren Buffett, famously calling it an unproductive asset, with his argument being that gold does not generate income, unlike stocks, bonds, or real estate, which can produce dividends, interest, or rental income.
While managed money accounts have been net sellers during the past seven weeks, reducing their net long by 5.2 million ounces to 18.2 million, potentially signalling a short-term peak, asset managers and other more long-term-focused investors have increased total holdings across exchange-traded funds by 2.9 million ounces to 86.2 million—still a far cry from the pre-US rate hike peak at 106.8 million ounces—highlighting plenty of room for additional demand should the underlying trends continue to support. Read more in our latest gold update here.
Technical analysis suggests that gold’s short-term peak is around USD 3,100, potentially followed by a period of consolidation before a renewed attempt toward our year-end target of USD 3,300 per ounce. After three failed attempts, last year’s breakout above USD 2,074 confirmed the completion of a cup and handle formation, developed over a 13-year period (2011–2024). Using the distance from the cup’s bottom (large box) to the handle’s top (small box), the technical target is USD 3,100.
Copper increasingly exposed to a binary tariffs event
The New York-traded High Grade copper futures reached a record closing high on Thursday at USD 5.1120 a pound, marking a culmination of a month-long surge that has triggered a major dislocation between US prices and the rest of the world. A development driven, not by strong fundamental demand, but mostly by a phenomenal arbitrage window that has been opened due to Trump’s push for tariffs on imports of the metal.
Ahead of a potential announcement of tariffs, a decision that could still be months away given the time an investigation carried out under Section 232 of the Trade Expansion Act normally takes, traders have been rushing copper to the US in order to log in premiums of up to 13% relative to prices in London, a move that has helped tighten the rest of the world where more than 90% of global demand is consumed. It’s worth noting that holding a high-grade futures position at a 13% premium to London has raised binary risks in the market, meaning prices could suddenly drop by more than 10% if no tariffs are introduced or surge even higher if the level is 25%, in line with those applied on steel and aluminum.
Crude oil: Range-bound despite growth concerns
Crude prices have settled into a relatively tight range near the recent lows, weighed down by fears Trump’s aggressive trade policies may trigger a global trade war that would negatively impact global growth and demand. In addition, the prospect of rising supply from OPEC+ next month has also been weighing on prices at a time when the US administration has been talking down oil prices, potentially, if successful, scoring a major own goal.
We believe these concerns are overstated, not least considering the risk of lower output due to sanctions and several of the OPEC+ members having pledged additional cutbacks to compensate for exceeding quotas, a move that if carried out would offset the planned increase. Iran is once again in the crosshairs of the US administration after Treasury Secretary Scott Bessent recently said the US would ramp up sanctions on Iran, a producer that despite sanctions in the past four years managed to increase production by around 1.1 million barrels a day. A clear sign of that threat was seen this week when the US penalised a Chinese refinery and its CEO for allegedly buying Iranian oil.
With this in mind, we see no major change in OPEC+ production in the coming months, instead a redistribution among its members with GCC producers being the main winners, allowing them to increase production without hurting prices. In addition, it has become increasingly clear that Trump’s “Drill, baby, drill” cannot be achieved without hurting output from high-cost producers, many of which are located in the US, and production growth will likely slow, thereby supporting prices while handing market share back to OPEC.
Recent commodity articles:
19 Mch 2025: Has the gold express already left the station?
17 Mch 2025: COT Report: Silver and copper stands out in week of energy weakness
14 Mch 2025: Gold surges past USD 3,000 as haven demand grows
12 Mch 2025: Tariffs and the energy transition: Key drivers of copper demand
11 Mch 2025: Gold holds steady despite deleveraging risks in volatile markets
10 Mch 2025: COT Report: Wholesale reductions in speculators' USD and commodity longs
7 Mch 2025: Commodities Weekly: Tariffs, trade tensions, fiscal bazooka, and Ukraine
5 Mch 2025: Tariff threat disconnects HG copper from global market
4 Mch 2025: Stagflation and geopolitical tensions fuel renewed demand for gold
3 Mch 2025: COT Report: Broad retreat sees WTI longs slump to 15-year low
28 Feb 2025: Commodities weekly: Broad weakness as tariff fatigue sets in
24 Feb 2025: COT Report: traders turn selective despite ongoing broad rally
21 Feb 2025: Commodities weekly: energy market strength and Trump rethoric fuel surge
18 Feb 2025: COT report: crude, gold and grains see mild profit taking
5 Feb 2025: Broad Strength Drives Commodities sector to 26-month High
4 Feb 2025: Crude Oil Wipes Out 2025 Gains as Tariffs and Demand Weighs
3 Feb 2025: COT Report: Mixed Week Seen Ahead of Trump's Tariff Offensive
1 Feb 2025: YouTube: Joining Kevin Muir on The Market Huddle podcast
Podcasts that include commodities focus:
18 Mch 2025: US market found support, but how durable will it be?
14 Mch 2025: Is silver set to shoot the lights out?
10 Mch 2025: US un-exceptionalism is the theme
7 Mch 2025: US bear market risks ratchet higher. EUR train has left the station
4 March 2025: Are we on the verge of a big whoosh?
25 Feb 2025: Meltdown risks are rising. What to watch next
18 Feb 2025: Europe is on fire
5 Feb 2025: Mag 7 risks underappreciated?
3 Feb 2025: If new Trump tariffs stick, markets have only just begun to react
31 Jan 2025: Does the market think Trump is bluffing?
29 Jan 2025: The DeepSeek winners emerge
27 Jan 2025: DeepSeeking missile strikes global markets
24 Jan 2025: Four days in, Trump continues to dominate headlines, but ...
20 Jan 2025: Trump 2.0 swings into action
17 Jan 2025: Brace for Monday, as a new era begins
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