Quarterly Outlook
Equity outlook: The high cost of global fragmentation for US portfolios
Charu Chanana
Chief Investment Strategist
Commodities weekly: As chaos reigns, what’s next for markets?
Ole Hansen
Head of Commodity Strategy
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Key points in this update:
- Battered and bruised by Trump's tariff rollercoaster ride, the market saw a fragile state of calm emerge after Washington buckled and announced a 90-day tariff pause to calm an increasingly disorderly US government bond market.
- The tariff delay eased recession fears, allowing the Bloomberg Commodities Index to trade higher on the week, partly reversing the biggest four-day slump since 2022, with gains being led by silver, gold, corn, and soybeans.
- Gold hit all-time highs as underlying concerns remain, while silver's brutal slump has helped attract fresh demand.
- Copper traders bet on China stimulus, with crude oil stabilising after tumbling towards supply destruction territory.
Battered and bruised by Trump's tariff rollercoaster ride, a fragile state of calm emerged after Washington buckled and announced a 90-day tariff pause on all reciprocal tariffs ex-China. Prior to this, markets had seen a justified meltdown as they tried to absorb the blow of Trump's far larger-than-expected tariffs on all its major counterparts, sparking threats of retaliation and a broad selloff around the world on concerns that a global trade war on this scale and magnitude will drive an economic slowdown—not least in the US, where inflation forecasts have spiked, and sentiment among consumers and businesses has fallen sharply during the past couple of months. The relief rally that followed the tariff delay announcement also supported the commodities sector, with the Bloomberg Commodities Index managing a rebound, partly reversing the biggest four-day slump since 2022. Despite of this, the overall post-Liberation Day sell off has been brutal across some of the sectors, not least across a pro-cyclical sectors like energy. As the dust settles, it's clear that the global economic outlook remains fragile, and even after removing the highly controversial reciprocal tariffs, US consumers are still facing the biggest tax rise through tariffs in more than 100 years, while major exporters of goods contemplates the economic fallout. Next up, traders will be looking for a Chinese response, with additional stimulus measures potentially adding some support to industrial metals.
What caused Trump to buckle?
It was also a week when many realised the real danger was not the slump seen across global stock markets, but instead an increasingly disorderly behaviour in the US government bond market, normally considered one of the safest investments, which should benefit during times of turmoil. Instead, we saw a disorderly spike in long-end US Treasury yields, while global equity markets continued to fall, basically leaving investors with no safe options besides ultra-short-term bonds in anticipation of further rate cuts, gold, and a few currencies, most notably EUR, CHF, and JPY.
A four-day 65 basis point jump in 10-year US Treasury notes briefly took the yield above 4.5%, and while the actual rate was not the focus, it was the pace with which bonds tumbled that made everyone take note, raising speculation the move was driven by foreign selling pressure, focusing on China and Japan and partly due to:
- Rising need to repatriate dollars to meet import and debt obligations.
- Concerns over USD's role as a reserve currency in a fragmented world.
- Retaliation to the tariffs imposed by the US administration.
- Foreigners still hold 33% of USD-denominated debt, so any unwind matters.
Tariff pause drives temporary rebound, while gold shines bright
Commodity markets surged following Trump's tariff delay, easing fears of a global recession hurting demand. Leading the gains were the metals both precious and industrial, while crude oil rebounded nearly eight dollars from a four-year low before reversing lower again on the realisation the global economic outlook remains challenged at a time when OPEC+ is accelerating its planned production increase. Gold's very strong recovery back to a fresh all-time high, meanwhile, sent a signal that all is not well, and its continued strength suggests that despite the tariff pause, underlying concerns remain—geopolitical and economic tensions, mounting fiscal debt, and ongoing central bank demand.With markets held hostage by the White House's erratic announcements, it's still too early to call a bottom for pro-cyclical commodities in the energy and industrial metals sectors. However, the tariff pause offers traders a moment to reassess the outlook while trying to determine how much has already been priced in.
The Invesco Bloomberg Commodity UCITS ETF is one of several exchange-traded funds that replicates the performance of the Bloomberg Commodity Total Return Index, an index which tracks the performance of 24 major commodity futures shared almost equally between energy, metals, and agriculture, with the largest holdings being Brent & WTI crude oil (15%), US natural gas (7.8%), gold (14.3%), copper (5.4%), and the soybean complex (15.1%). The index trades up 3% year-to-date and despite a +5% drubbing this month remains one of the best-performing asset classes, not least due to strong performances in gold, natural gas, copper, and coffee.
Gold’s deleveraging pullback spurs fresh demand
Spot gold's initial response to the steepest US trade barriers in more than 100 years was a move to a fresh record high of USD 3,167 per troy ounce on heightened inflation risks, before surging volatility in response to collapsing stock markets saw traders turn their attention to capital preservation and deleveraging—the dash-for-cash focus hurt all leveraged positions across the commodities sector, including those in silver, which experienced a brutal 16.5% top-to-bottom slump, but also bullion, which despite its safe haven label during times of turmoil fell by around 4% before finding solid support around USD 2,950.
As the dust begins to settle following one of the worst risk reduction periods in recent years, demand for silver and especially gold has re-emerged, with gold has reaching a fresh all-time-high above USD 3,200, while silver has managed to retrace half of what was lost during the first week of April, both strongly suggesting that underlying concerns remain.
A combination of heightened global economic tensions, the risk of stagflation – a combination of lower employment, growth and rising inflation - a weaker dollar, will, in our opinion, continue to support bullion, and to a certain extent also silver. Adding to this is a market that is now aggressively positioning for the Fed to deliver more cuts this year—at current count more than 75 basis points of easing by year-end, and not least continued demand from central banks and high net worth individuals looking to reduce or hedge their exposure to US government bonds and the dollar.
With all the mentioned developments in mind, we maintain our forecast for gold reaching a minimum of USD 3,300 this year, while silver, given its industrious exposure and recession worries, may struggle to materially outperform gold as we had previously forecast. Instead, based on the XAU/XAG ratio returning below 90 from above 100 currently, we see silver eventually making it higher towards USD 37.
In silver, the recent and brutal slump in COMEX futures saw the high-grade price move from a 75 cents premium to spot silver prices in London on tariff speculation to a 60 cents discount as the tariff threat was removed, together with recession angst explaining why silver suffered such a relatively big correction. With the spread now trading close to neutral, silver is once again able to respond to outside market movements, especially those in gold and copper, both of which are trading higher on safe haven and China stimulus speculation.
Copper traders bet on China stimulus
Copper prices surged following Trump's announcement of a 90-day tariff pause, but significant uncertainty remains over the long-term impact of tariffs on demand for pro-cyclical commodities like copper and other industrial metals. Prior to the rebound, the downturn was fueled by escalating trade tensions, with US duties on Chinese goods rising to 145% and Beijing retaliating by capping its tariff at 125% hike, calling Trump levies a “Joke”. These aggressive measures threaten not only US–China trade relations but also increase domestic inflationary pressures in the US while damaging China's export-driven economy, which is already grappling with weak domestic demand.
Fears that US tariffs could extend to copper imports drove a sharp rise in New York futures last month, with prices at one point commanding a 15% premium over London. However, as the tariff war deepened and global recession fears mounted, copper prices reversed course—HG copper futures plunged 21%, partially due to a halving of that transatlantic premium.
After once again finding support near USD 4 per pound, HG copper has since rebounded, with market focus shifting toward potential stimulus from China to counterbalance weaker exports. Given the unsustainable nature of a +100% tariff for both US consumers and Chinese producers, we believe a de-escalation in trade tensions remains the most likely outcome—one that could ease recession fears and trigger a further relief rally.
That said, expectations of a near-term supply deficit have been scaled back. While global demand may not reach earlier forecasts, the structural demand linked to the energy transition—particularly for copper's role as a key conductor—remains intact and unlikely to face a major slowdown.
Crude prices tumble towards supply destruction territory
A combination of factors continues to weigh heavily on oil prices, notably the ongoing global trade war, which is likely to curtail economic growth and dampened energy demand, alongside OPEC’s surprise decision to accelerate production from next month. This shift reflects a broader market realization: prices must find a lower equilibrium where high-cost producers are compelled to reduce output, thereby mitigating the dual challenge of slowing demand growth and rising supply from key OPEC+ members.
Following the Liberation Day announcement of reciprocal tariffs, Brent and WTI crude futures both experienced a sharp $12 selloff, briefly plunging to four-year lows—levels last seen during the peak of the pandemic, when the global economy entered a synchronized slowdown. Although the implementation of some tariffs, excluding those on China, was delayed by 90 days, the market damage had already been inflicted, leaving prices struggling to regain stability.
Further amplifying the downward pressure has been significant selling from macro-focused funds using crude oil as a hedge against recession risks. This strategy is traditionally centered on the bond market, but with rising yields rendering bonds ineffective as a hedge in this cycle, some funds have shifted their focus to commodities like oil.
The latest price slump was intensified by OPEC+’s unexpected move to fast-track production increases beginning in May. The official rationale was to penalize quota violators—namely Kazakhstan, Russia, and the UAE. However, this strategy likely reflects a broader objective by core producers, especially Saudi Arabia, to reclaim market share lost in recent years to non-OPEC+ competitors. Previous production cuts had propped up prices, enabling high-cost producers, particularly in the U.S., to expand output.
WTI crude’s drop to $60 per barrel has pushed it below the break-even threshold for many U.S. shale operators, including those in the Permian Basin—the most productive oilfield in the world and the heart of the American energy industry. While many U.S. producers have hedged portions of their output through futures contracts, a sustained period of suppressed prices could lead to widespread production cutbacks, albeit nowhere near the scale of the reductions seen in 2020 but still enough to help balance the market.
A large share of US gas production is tied to oil activity, especially in shale formations, where oil companies often extract so-called associated natural gas alongside. Crude oil generally has a higher market value than natural gas, so if oil prices fall, drilling activity will likely slow, which in turn reduces both oil and associated gas production. In tandem with reduced output from high-cost producers, another key source of potential price support lies in the geopolitical arena. Sanctions and tariffs targeting countries like Venezuela, Iran, and Russia threaten to erode their production capacity in the coming months. This disruption presents a strategic opening for GCC producers—particularly Saudi Arabia—to boost output and strengthen their foothold both within OPEC and the broader global market.
Recent commodity articles:
8 April 2025: Golds deleveraging pullback fails to shake supportive outlook
7 April 2025: COT on Forex and Commodities - April 7 2025
4 April 2025: Commodities weekly Tariff-led recession pain triggers sharp reversal
3 April 2025: Tariff-related recession fears ignite widespread commodities selloff
2 April 2025: Commodity Outlook: Commodities rally despite global uncertainty
31 Mch 2025: COT Report: Ongoing USD selling amid mixed week for commodities
26 Mch 2025: Commodities show strength in Q1, led by a select few
25 Mch 2025: Crude oil Sanctions threat counters tariff-driven demand worries
24 Mch 2025: COT on Forex and Commodities - 24 March 2025
21 Mch 2025: Commodities weekly: High-flying precious metal sees profit taking
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:
11 April 2025: US and China are slipping into an economic war
4 April 2025: Markets melts down as recession risks go global
1 April 2025: Bracing for Liberation Day
25 Mch 2025: Did Trump just blink?
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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