Pepperstone’s outlook for commodities in 2025

The year 2025 is expected to bring significant shifts in global commodity prices, with some commodities facing a decline while others, such as gold, are likely to witness an increase. Market observers are particularly focused on potential further stimulus measures from China, hoping it will boost demand for commodities in the world's second-largest economy. Michael Brown, Senior Research Strategist at Pepperstone, shared his insights on the trends shaping the commodity market moving forward during an interview with CNBC Africa. Brown highlighted that the driving factors behind the commodity market seen in 2024 are likely to continue influencing market dynamics in 2025. For instance, the demand side for crude oil has been disappointing, with markets quick to discount any geopolitical risks. On the other hand, gold has seen persistent demand, especially from emerging markets and central banks, driving prices higher. China's recent gold purchases further fueled bullish momentum in the market. Looking ahead to 2025, Brown pointed out key factors that could potentially alter market dynamics. One crucial aspect to monitor is China's stimulus measures, especially if the focus shifts towards stimulating real demand in the economy rather than solely propping up financial markets. Such a shift could serve as a bullish catalyst for commodity prices, including industrial commodities. Another key wildcard is the impending inauguration of President-elect Trump, as his policies could impact various sectors. Brown raised questions about potential tariffs on raw materials and commodities, emphasizing the uncertain market conditions that could arise from such policy changes. Gold, a perennial favorite among investors, is expected to remain resilient in 2025 due to its role as an inflation and political risk hedge. With inflationary pressures rising globally and political uncertainties prevailing in various regions, gold is likely to maintain its firm position in investment portfolios. When discussing other commodities in the market, Brown highlighted the significance of copper, particularly in the transition to electric vehicles. Copper's use as an economic indicator and its role in global supply chains make it a commodity to watch over the medium to long term. Silver, known as a higher beta version of gold with industrial applications, also attracts attention. As for gold price targets in 2025, some asset managers have set ambitious goals, with projections ranging up to $3,000 per ounce. Brown cautioned against fixating on specific numbers, underscoring the importance of focusing on breaking short-term price ranges. While he anticipates further upside for gold, he believes the rally may not mirror the substantial gains seen in the previous year. In considering the impact of fiscal and monetary policies in the United States on commodities, Brown emphasized the uncertainty surrounding fiscal outlook compared to the more predictable monetary policy. While the Federal Reserve's rate cuts are anticipated, the specifics of Trump's fiscal plans, like tax cuts and increased government spending, remain unclear. This uncertainty makes fiscal decisions a crucial factor likely to drive commodity markets in the near term. In conclusion, Brown highlighted the significance of monitoring both fiscal and monetary policy developments for a comprehensive understanding of commodity market trends. As uncertainties persist in the global economic landscape, staying attuned to key factors impacting commodity prices will be essential for investors and market participants in navigating the evolving market conditions.