As the global economy grapples with ongoing challenges, careful attention should be paid to the behavior of key commodities entering the third quarter (Q3) of 2024.
Precious metals such as gold, silver and silver have risen in value so far this year, and many analysts believe the rise will continue.
Gold price prediction
In a letter to clients this week, Nikos Tzabouras, a Senior Financial Editorial Writer at Tradu, said that with “two active military theaters, key elections on the horizon and uncertain global monetary policy, safe haven flows into gold could continue.”
“Together with a buying wave from the central banks of emerging economies, led by China and its de-dollarization, prices could easily reach new records,” Tzabouras added.
However, he warns that the Fed’s reluctance to cut rates is supporting the dollar, and its strength is also increasing the reserve currency’s appeal, eroding the yellow metal’s bullish prospects.
Is oil consumption decreasing?
Tzabouras said oil consumption is expected to slow sharply this year, partly due to the push for net zero emissions and the proliferation of electric vehicles.
“At the same time, supply is increasing, from non-OPEC countries such as the US, which are poised for new records,” he notes. While this unfavorable mix put pressure on prices in the second quarter, Tzabouras believes a recovery in the third quarter is likely.”
“The market could tighten in the coming months due to the extension of massive OPEC+ supply cuts,” he added. “In addition, the adoption of electric vehicles will slow down in 2024, fossil fuels remain important and the transition to clean energy faces challenges.”
Still, despite the prospect of a recovery, the $100 scenario is “difficult and such prices increase the risk of demand destruction,” says Tradu’s senior financial editorial writer.
Copper supply expectations
Copper reached record highs this year. Despite the subsequent downturn, Tzabouras expects the supply-demand dynamics to drive more profits.
“Consumption will continue to increase as the metal is an essential part of the artificial intelligence revolution and the clean energy transition,” he writes. “At the same time, supply has tightened significantly, with major miners lowering their production targets for this year. However, there are risks associated with favorable fundamentals, such as China’s ailing real estate sector and the slowdown in electric car adoption.”
Natural gas price forecast
Demand is expected to grow significantly this year. Tzabouras explains that this is largely due to industrial consumption from Asia.
“Things are a bit murkier on the supply side as major drillers have lowered their production targets,” he notes. “Natural gas recovered in the second quarter and improved fundamentals could provide further upside.”
Tzabouras explains that the resource is protected from the negative impacts of the shift away from fossil fuels because it is largely considered a bridge energy source.
Yet he acknowledges that there are headwinds, such as reduced consumption in Europe and the historically warm weather.
“China is a prominent source of risk with its uneven recovery, while Indian growth may have peaked and Prime Minister Modi’s reduced mandate creates some uncertainty,” Tzabouras added.
Should Investors Focus on Commodities?
Nikos Tzabouras’ commentary paints a complex picture for the commodities market in the third quarter. While some commodities, such as copper and natural gas, appear poised for growth due to supply constraints and rising demand, others face headwinds. Oil, for example, is caught between a potential recovery due to production cuts and slowing demand due to the green energy transition.
Learn more about the best commodity futures
Commodity futures provide a way to hedge against inflation and diversify portfolios beyond traditional assets such as stocks and bonds. These contracts allow speculation on price movements of essential commodities, offering the potential for significant returns. For example, the Metals Futures list in the Commodities section of Investing.com shows futures prices and quotes for more than ten metals.
