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 show strength in Q1, led by a select few
Ole Hansen
Head of Commodity Strategy
Key points
The commodities sector has emerged as one of the best-performing asset classes this year with a major index showing a 7.9% return
On a sector level, precious and industrial metals stand out, having delivered returns this quarter of 15.2% and 12.5%, respectively
The energy sector has mostly been a story about natural gas strength, while crude and fuel products have struggled
The agriculture sector has delivered a small return with broad losses across grains partly offsetting gains in softs and livestock
Looking at the performances, we find that gold, copper, and natural gas have delivered close to 75% of the total return
The commodities sector has emerged as one of the best-performing asset classes this year, and as the first quarter moves to a close, and a 2 April tariff announcement from the Trump administration looms, let’s take a look at the winners and losers so far. In order to do so, we focus on our preferred index, the Bloomberg Commodities Index, which tracks the total return of 24 major futures markets, spread close to evenly between energy, metals, and agriculture.
The index, which is tracked by several major ETFs, trades up 12.2% in the past twelve months, with the bulk of that gain being achieved within the last three months. The year-to-date return shows a 7.9% gain, well above the return seen on some of the major equity market indices.
Metals: The standout performers
On a sector level, precious and industrial metals stand out, having delivered returns this quarter of 15.2% and 12.5%, respectively, while the 12-month performance is even more impressive at 37.6% and 18.1%. This has been driven by continued haven demand for gold (+14.7%) and silver (+16.7%) amid ongoing demand from investors seeking protection in tangible assets against geopolitical and economic uncertainties, as well as central bank purchases of gold to reduce their dependency on fiat currencies, especially the USD.
The industrial metals sector shows a clear distinction between New York-traded HG copper and those traded and tracked by futures contracts on the London Metal Exchange. The HG copper contract has surged to a record high on speculation that Trump may implement tariffs on imports within weeks. The premium HG copper trades over London has reached 17%, helping to explain the major contribution of industrial metals to the BCOMTR—a sector that otherwise would struggle amid global growth concerns.
Energy: Natural gas takes the lead
The energy sector has mostly been a story about natural gas strength, with a total return so far this year of around 25.5%, while crude and fuel products have struggled amid a tug-of-war between economic growth concerns impacting demand and the increased threat of sanctions potentially reducing supply from Iran and Venezuela. This has, in turn, offset a planned OPEC+ production increase from next month.
Agriculture: Modest gains with mixed results
Finally, the agriculture sector has delivered a small return of 2.2%, with broad losses across an amply supplied grain and soybean complex partly offsetting gains in softs and livestock. Standout performances have come from Arabica coffee and sugar and, to a certain extent, live cattle.
Key takeaways: The power of broad exposure
Looking at the performances and individual weights, we find that gold, copper, and natural gas have delivered close to 75% of the total return, despite the three contracts only carrying a total index weight of 27.5%. This highlights the advantage of holding broad exposure to commodities instead of trying to pick individual winners.
Mega-trends to drive long-term gains
In our opinion, the long-term trend for key commodities remains upward, driven by several major themes or mega-trends, and they highlight why we believe a broad approach is the best option for long-term gains:
- Deglobalisation: The US-China rivalry is reshaping supply chains, prioritising security over cost, and increasing demand for critical resources.
- Defence: Rising geopolitical tensions are fuelling record military spending and stockpiling of key materials.
- Decarbonisation and power demand: Investments in renewables, EVs, AI, and data centers are driving demand for metals and energy.
- De-dollarisation: A shift from US dollar reliance is boosting gold purchases as a financial hedge.
- Debt and fiscal risks: High global debt and deficits are increasing demand for hard assets like gold and silver.
- Demographics & urbanisation: Ageing Western populations and growing emerging economies are driving resource demand.
- Climate change: Higher power needs for cooling, food security concerns, and protectionism
So far this millennium, we have witnessed three major commodities bull cycles, the biggest being the China-led rally from 2002 to 2008, followed by the pandemic- and Ukraine war-led spike between 2020 and 2022. In the past three years, the index has traded mostly sideways before making a renewed upside attempt within the past couple of months.
Recent commodity articles:
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:
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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