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
Commodities weekly: Broad weakness as tariff fatigue sets in
Ole Hansen
Head of Commodity Strategy
Key points in this update:
- Tariff fatigue emerged this week as global financial markets scrambled to keep up with the barrage of executive orders and off the cuff remarks from President Trump
- The market stress caused by uncertainty on so many different levels helped drive volatility higher across most asset classes, including commodities, forcing a broad retreat
- A leading commodities index saw its first weekly decline in five, with a 2.9% loss on the week reducing the year-to-date gain to 5.7%
- The energy sector being weighed down by demand threats and increased supply from Iraq, while gold’s overdue correction gathered some further momentum
"There are decades where nothing happens, and there are weeks where decades happen" is a quote I will repeat again this week, as global financial markets scramble to keep up with the barrage of executive orders and comments from the White House, some of which seem like they are made up without careful prior consideration. Especially, Trump's favourite tariff weapon was once again rolled out in force this past week, with Europe, Mexico, Canada, and not least China being the focus. These latest pronouncements on trade tariffs drained investor appetite across the world, not least in the US, where the S&P 500 erased its gains for 2025, while the tech-heavy Nasdaq saw all of its post-election gains wiped out.
The market stress caused by uncertainty on so many different levels helped drive volatility higher across most asset classes, including commodities, thereby triggering a broad retreat from leveraged funds that are forced to adjust (reduce) exposure when volatility jumps. This helps to explain why the only safe havens, apart from US government bonds, that worked this past week was the US dollar, which strengthened thereby inadvertently adding some additional downward pressure on key commodities, while gold and other investment metals suffered a setback, partly explained by the need for consolidation after gold posted a nine-week run of gains.
Overall, the Bloomberg Commodity Total Return Index, which tracks a basket of 24 major futures contracts split almost evenly between energy, metals, and agriculture, saw its first weekly decline in five, with a 2.9% loss on the week reducing the year-to-date gain to 5.7%, still a notably stronger performance than most other asset classes, especially the stock market. All sectors traded lower, led by the agricultural sector where wheat, sugar, and corn led the declines. Silver, gold’s temperamental and more volatile sibling, slumped 4.9% while gold’s orderly decline at the time of writing had taken it lower by 2.9% on the week.
Energy sector focusing on demand threats and increased supply from Iraq
The energy sector also suffered a broad decline on concerns a global trade war may lead to lower growth and with that demand for fuel products, at a time when OPEC+ is still undecided about crude oil production levels for April and beyond, while ongoing peace talks to end the war in Ukraine also weighed on sentiment. The focus on these developments combined with news Iraq may soon resume oil exports from the semi-autonomous Kurdistan region through the Iraq-Turkey pipeline saw WTI and Brent head for a monthly loss after giving back all of the early January gains. Meanwhile, natural gas, the best-performing commodity so far this year in response to very strong winter demand and record LNG exports, suffered a minor setback that still left a year-to-date gain of 26.6%.
Brent crude oil’s slump below USD 74.15 support has raised the risk of an extension towards an area of support around USD 71 from where prices bounced on several occasions during Q4-2024.
Industrial metals (copper)
The industrial metal sector, meanwhile, held up reasonably well, partly due to copper prices on the COMEX futures exchange receiving a relative boost from Trump's threat to impose tariffs on copper imports, potentially causing a dislocation leading to relatively higher prices in New York not being reflected elsewhere amid a current rise in warehouse stocks monitored by the two exchanges in London and Shanghai.
This week, President Trump signed an executive order instructing Commerce Secretary Howard Lutnick to investigate whether foreign copper production and imports threaten the United States' economic and national security. In 2024, the U.S. consumed approximately USD 17 billion worth of copper, importing about 45% of this amount, primarily from Chile. Copper is used by industries such as automotive, electronics, telecommunications, and construction for plumbing and roofing. The key question is whether Trump can use tariffs to boost U.S. domestic production and refining. Given the lengthy process to increase production, this decision, if implemented, could raise U.S. prices and diminish the appeal of HG copper futures as a hedging and trading instrument.
Gold's overdue correction drives silver lower
Gold’s overdue correction gathered some further momentum ahead of the weekend as volatility spikes across markets force leveraged funds to reduce across-the-board exposure, not least across commodities that in recent weeks and months had enjoyed a great deal of interest from hedge funds. The November correction saw it drop USD 253 before rallying USD 419, and so far the setback is less than USD 100. Looking for support at USD 2,813 ahead of the key at USD 2,790 level, the October peak and previous record high.
Where gold goes, silver follows, but often at a faster pace. The current correction has pushed spot silver prices lower towards the centre of the range that has prevailed since November. Some attention should be given to the 0.5 and 0.618 Fibonacci retracement levels at USD 31.08 and USD 30.54, with the latter also being the 200-day moving average. The gold-silver ratio (XAUXAG) trades near 92 ounces of silver to one ounce of gold, an area that has provided resistance on several occasions since early 2023, eventually leading to periods where silver outperformed.
Overall, we see this as a healthy correction before a fresh push towards USD 3,000 and beyond in gold and silver towards the high USD 30’s.
Mega trends providing long-term support
This past week, I visited Zurich and Paris, meeting with clients and journalists to present and discuss our current outlook for commodities. While expressing some concerns about the speed with which commodities have rallied at the start of the year, combined with the potential demand-damaging impacts of a trade war, we maintain our long-term and long-held bullish outlook, driven by several mega-trends that have and will continue to evolve in the coming years. Below is a slide from the presentation highlighting some of these, while more can be found in this recent update.
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
31 Jan 2025: Commodities weekly: Strong January led by precious metals
29 Jan 2025: Agriculture sector rally led by coffee, corn and cattle
27 Jan 2025: COT Report: Commodity buying extends to fourth week
24 Jan 2025: Commodities weekly: Trump tariff threats and energy agenda in focus
23 Jan 2025: Crude oil weakens amid tariff uncertainty
22 Jan 2025: Gold and silver see fresh gains as Trump 2.0 era begins
20 Jan 2025: COT Report: Elevated commodities longs face short-term risks
17 Jan 2025: Commodities weekly: Strong January rally pauses ahead of Trump
15 Jan 2025: Q1 2025 Commodity outlook: A bumpy road ahead calls for diversification
14 Jan 2025: COT Report: Hedge fund long jumps to 17-month high led by crude, gas and metals
13 Jan 2025: Crude oil rally amid winter demand and Russian sanctions
10 Jan 2025: Commodities weekly: Strong start to the year led by energy and metals
7 Jan 2025: COT Report: Managed money's year-end positioning in forex and commodities
20 Dec 2024: Silver's resurgence in 2024: A precious metal with an industrial edge
17 Dec 2024: Investors cash in: Gold and silver see year-end profit taking
17 Dec 2024: Podcast: A wild ride in 2025 awaits
16 Dec 2024: COT Report: Agriculture in demand; Traders lift bets against the euro
13 Dec 2024: Commodities weekly: The forward curve and impact on returns
10 Dec 2024: Brazil's coffee crisis pushes Arabica to all-time high
9 Dec 2024: COT Report: Speculators bought crude and gold: euro shorts reach 4-year peak
6 Dec 2024: Commodities weekly: Copper rises on China optimism; OPEC delay signals crude weakness
3 Dec 2024: COT: Mixed week in commodities as dollar buying continued
Podcasts that include commodities focus:
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
Latest Market Insights
Quarterly Outlook
-
-
Quarterly Outlook
Equity Outlook: The ride just got rougher
Charu Chanana
Chief Investment Strategist
-
Quarterly Outlook
China Outlook: The choice between retaliation or de-escalation
Charu Chanana
Chief Investment Strategist
-
Quarterly Outlook
Commodity Outlook: A bumpy road ahead calls for diversification
Ole Hansen
Head of Commodity Strategy
-
Quarterly Outlook
FX outlook: Tariffs drive USD strength, until...?
John J. Hardy
Global Head of Macro Strategy
-
Quarterly Outlook
Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
Althea Spinozzi
Head of Fixed Income Strategy
-
Quarterly Outlook
Equity Outlook: Will lower rates lift all boats in equities?
Peter Garnry
Chief Investment Strategist
After a period of historically high equity index concentration driven by the 'Magnificent Seven' sto... -
Quarterly Outlook
Commodity Outlook: Gold and silver continue to shine bright
Ole Hansen
Head of Commodity Strategy
-
Quarterly Outlook
Macro Outlook: The US rate cut cycle has begun
Peter Garnry
Chief Investment Strategist
The Fed started the US rate cut cycle in Q3 and in this macro outlook we will explore how the rate c... -
Quarterly Outlook
FX Outlook: USD in limbo amid political and policy jitters
Charu Chanana
Chief Investment Strategist
As we enter the final quarter of 2024, currency markets are set for heightened turbulence due to US ...
Disclaimer