Commodity Outlook: Gold and silver continue to shine bright

Ole Hansen

Head of Commodity Strategy

Key points

  • Multiple uncertainties, including the US presidential election will continue to underpin demand for investment metals, potentially led by silver, provided emerging signs of stabilising demand for industrial metals in China can be sustained

  • The energy sector will be watching the US presidential election closely, given the two candidates’ opposing views on traditional versus renewable sources of energy. Having spent a considerable time this year trading in the USD 80’s we now see Brent being stuck in the 70’s for the foreseeable future

  • We see additional but at this stage not spectacular gains for copper supported by lower funding costs as the US Federal Reserve cuts rates, further reducing the risk of a recession, a stabilising growth outlook in China amid government support and continued demand towards the green transition


In early 2024, we focused on the metal sector as a potential winner for the year and beyond. Following an already strong first half, the precious metal sector, led by gold, continued higher in the third quarter, as investors sought protection in an uncertain world, culminating in September with the start of a supportive US rate-cutting cycle. The energy and industrial metals sectors—two growth-dependent sectors—suffered setbacks amid a deepening slowdown in China and rising recession risks elsewhere, most notably in Europe.

As of now, the Bloomberg Commodity Total Return Index is up around 3.5% for the year, with strong gains in precious metals, soft commodities, and, to a lesser extent, industrial metals being offset by losses across the energy sector, and not least the grains sector, where prices remain subdued following another strong production year. While adverse weather drove large gains in coffee, cocoa, and sugar, the year so far has belonged to metals, especially gold and silver. These two investment metals have seen strong demand from investors.

Election impact on commodities

The energy sector will be watching the US presidential election closely, given the two candidates’ opposing views on traditional versus renewable sources of energy. Trump’s pro-energy policies may, over time, add downward pressure on energy prices from higher production and upward pressure on OPEC+ to keep them supported, while a Harris presidency would maintain policies that promote the use of electric vehicles and renewable energy, both of which require large amounts of green transformation metals, from copper and lithium to silver, aluminium, and cobalt.

Overall, the risk of large-scale unfunded government spending—whether it’s infrastructure, renewable energy focus, or social programmes—as well as US-China trade wars or tax cuts may all raise fresh concerns about inflation and rising levels of government debt, leaving the market to speculate that investment metals such as gold may find support no matter the outcome of the election. And in the event the US election results in a gridlocked Congress, even if fiscal spending is restrained, this would raise the risk of a recession, requiring more forceful Fed easing – also gold supportive.

Gold and silver have more upside

As we head towards the final quarter and the November US presidential election, we see multiple uncertainties continuing to underpin demand for investment metals, potentially led by silver, provided emerging signs of stabilising demand for industrial metals in China can be sustained. The reasons investors continue to pay record prices for gold boil down to concerns about global developments from fiscal profligacy, geopolitics, and “de-dollarisation” from central banks, as well as its general safe[1]haven appeal. A supportive rate-cutting cycle from the US Federal Reserve adds to the mix.

Given the prospect of these underlying demand trends not going away anytime soon, we forecast further upside to gold ahead of year-end and into 2025, when the yellow metal has the potential to reach another psychological mark of USD 3,000. Supported by a stabilising industrial metal sector, silver could potentially do even better, not least considering its relative cheapness to gold, which could see it take aim at USD 40 next year. This represents a conservative target of the gold-silver ratio at 75 versus the current level of around 83.

Crude’s sluggish demand outlook forcing a downward range shift

Brent crude oil’s September slump below USD 70 proved to be relatively short-lived. The market concluded that at such low prices, and with hedge funds holding a record short position (belief that prices would continue to fall), lower prices would require a recession to be justified. We estimate the probability of a US recession in 2025 is at only 25%, but with the impact of higher interest rates still uncertain. Despite some economic weaknesses, key indicators such as growth, capital expenditures, and job postings suggest the economy is not in a recession yet.

However, the combination of robust non-OPEC+ production growth and sluggish demand, especially in China, which has seen its 2024 demand growth slow to a few hundred thousand barrels a day from around 1.3 million barrels per day in 2023, is likely to keep the upside capped in the coming months. Some of the supply side focus is on Libya, where prolonged supply disruptions may help tighten the market, and on OPEC+ as we watch for whether they will continue to delay a planned production increase, now set for December. Having spent a considerable time this year trading in the USD 80’s we believe these considerations point to a Brent crude price stuck in 70’s for the foreseeable future, with a geopolitical event or a recovering China the possible drivers of any upside surprise.

Copper demand on the mend following mid-year slump

Copper prices have stabilized following a mid-year slump the came after a brief spike to all-time highs in late May, mostly from speculators looking for higher prices amid rising demand from the energy transition, and on the expected surge in demand for power from AI-related datacenters. The May to August slump was further exacerbated by a continued rise in stocks held at warehouses monitored by the major futures exchanges, most notably in China, which was seen as a sign of sluggish demand, eventually forcing prices lower to levels that by now have started to stimulate demand.

With the demand outlook stabilizing, a troubled supply side has also received some attention following production downgrades in Chile and Peru, two of the world’s top suppliers. Into the final quarter and beyond, we believe the combination of lower funding costs as the US Federal Reserve cuts rates, the avoidance of a recession in the US, a stabilising growth outlook in China amid government support and continued demand towards the green transition, will all help underpin prices, leaving the door open for additional but at this stage not spectacular gains as those we saw in early 2024.

Quarterly Outlook 2024 Q3

Sandcastle economics

01 / 05

  • Macro: Sandcastle economics

    Invest wisely in Q3 2024: Discover SaxoStrats' insights on navigating a stable yet fragile global economy.

    Read article
  • Bonds: What to do until inflation stabilises

    Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain inflation and evolving monetary policies.

    Read article
  • Equities: Are we blowing bubbles again

    Explore key trends and opportunities in European equities and electrification theme as market dynamics echo 2021's rally.

    Read article
  • FX: Risk-on currencies to surge against havens

    Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperform in Q3 2024.

    Read article
  • Commodities: Energy and grains in focus as metals pause

    Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities in Q3 2024.

    Read article
Disclaimer

Saxo Capital Markets (Australia) Limited prepares and distributes information/research produced within the Saxo Bank Group for informational purposes only. In addition to the disclaimer below, if any general advice is provided, such advice does not take into account your individual objectives, financial situation or needs. You should consider the appropriateness of trading any financial instrument as trading can result in losses that exceed your initial investment. Please refer to our Analysis Disclaimer, and our Financial Services Guide and Product Disclosure Statement. All legal documentation and disclaimers can be found at https://www.home.saxo/en-au/legal/.

The Saxo Bank Group entities each provide execution-only service. Access and use of Saxo News & Research and any Saxo Bank Group website are subject to (i) the Terms of Use; (ii) the full Disclaimer; and (iii) the Risk Warning in addition (where relevant) to the terms governing the use of the website of a member of the Saxo Bank Group.

Saxo News & Research is provided for informational purposes, does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. No Saxo Bank Group entity shall be liable for any losses that you may sustain as a result of any investment decision made in reliance on information on Saxo News & Research.

To the extent that any content is construed as investment research, such content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication.

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments.Saxo Capital Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Capital Markets or its affiliates.

Please read our disclaimers:
- Full Disclaimer (https://www.home.saxo/en-au/legal/disclaimer/saxo-disclaimer)
- Analysis Disclaimer (https://www.home.saxo/en-au/legal/analysis-disclaimer/saxo-analysis-disclaimer)
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)

Saxo Capital Markets (Australia) Limited
Suite 1, Level 14, 9 Castlereagh St
Sydney NSW 2000
Australia

Contact Saxo

Select region

Australia
Australia

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-au/about-us/awards

Saxo Capital Markets (Australia) Limited ABN 32 110 128 286 AFSL 280372 (‘Saxo’ or ‘Saxo Capital Markets’) is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms, Financial Services Guide, Product Disclosure Statement and Target Market Determination to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Saxo Capital Markets does not provide ‘personal’ financial product advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Capital Markets does not take into account an individual’s needs, objectives or financial situation. The Target Market Determination should assist you in determining whether any of the products or services we offer are likely to be consistent with your objectives, financial situation and needs.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc.

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website is not intended for residents of the United States and Japan.

Please click here to view our full disclaimer.