Quarterly Commodity Outlook – When global trade reshuffles

Despite a headline-driven first half of 2025, commodity prices showed resilience. Demand remained strong and economic growth persisted. The diversity of drivers behind a broad basket of commodities helped to bring stability in a challenging market environment. Going forward, the key things to watch are geopolitical developments, trade policy uncertainty, US Dollar weakness and economic growth.

In our view, commodities, being directly affected by tariff discussions and global trade, might take a short break in the third quarter. We see industrial demand as a headwind for oil and industrial metals due to front loading in the near term. Looking beyond that, we see resolutions on trade discussions and an uptick of global growth in 2026 as conducive to an increase in commodity demand (and prices) afterwards.

The current market environment is rich in opportunities for an active manager like we are. For long-only investors seeking an exposure to commodities as protection against concerns of a tariff-led inflation wave (recall that most commodities in the BCOM index are listed on US markets), there might be good entry points towards the latter part of H2.

Energy

Oil prices have been on a wild ride in recent months, surging nearly 20% in June amid escalating Middle East tensions, before losing steam as fundamentals took the driver seat again (see Figure 1). The spike followed Israel’s Operation Rising Lion, a significant military attack targeting Iranian nuclear and military sites. US involvement added fuel to the rally. However, Iran’s carefully measured response in its retaliatory strike on a US base in Qatar helped defuse broader escalation risks, quickly deflating the geopolitical risk premium. We believe that bearish fundamentals are setting the tone for the months to come.

One could even argue that Middle East tensions have created softer fundamentals for oil for three reasons. First, Iran’s oil infrastructure remained untouched during the conflict, avoiding supply shocks. Going forward, the Trump administration may ease enforcement of Iranian oil sanctions. Trump already commented on the possibility of Chinese buying of Iranian oil. Second, during the June oil rally, many US oil companies hedged future production forward, improving the economics of domestic oil production. Third, add to that the ceasefire and a more cautious tone from all involved parties have dampened the conflict’s impact on commodity markets.

At the same time, OPEC+ is slowing its production cuts. We are likely to see another increase of over 0.5 million barrels per day (mb/d) in September—effectively unwinding its 2.2 mb/d cut¹. OPEC feels very comfortable to release oil barrels to the market at the moment, as this appears to be the strongest season for oil demand and markets seem able to absorb additional oil. OECD inventories, which are relevant for oil prices and future curves, have failed to build so far (while global inventories and inventories on water have substantially increased). This should change in the fall, when lower demand is expected from a seasonal perspective. Compounding the bearish tilt is a wave of non-OPEC supply set to come to the market in H2 2025—roughly 1 million barrels per day from long-term projects in Guyana, Brazil, Angola, the US, and Norway. With global demand growth running below historical norms (and likely under 1 mb/d this year, IEA estimates 0.7 mb/d ), a return to an oversupplied market after the summer is increasingly likely.

Industrial metals

Industrial metals have held up surprisingly well, buoyed by a weaker US dollar and steady global growth, as reduced recession fears. Copper, in particular, has rallied sharply off its April lows (+30% for CME Copper). Driven largely by growing expectations that the US will slap tariffs on copper imports, following a similar playbook to aluminum and steel. In early July, Trump signalled that a 50% tariff on copper might be implemented on 1st of August. While not fully priced-in yet, copper markets have reacted strongly. The lead-up has created massive distortions: US importers rushed shipments ahead of the tariff threat, triggering a sharp inventory build in the US and tightness in the rest of the world. However, there’s still uncertainty. It is unclear which copper grades will be targeted, or whether major exporters like Chile will receive exemptions or quotas. We do not believe that there will be a major exemption at the beginning, as this would undermine the incentive of the US to create self-sufficiency. We already see that this frontloading is already coming to an end. Shippers don’t know if there is any grace period for copper on route to the US. Global inventory flows will normalize, bringing fundamental supply-demand dynamics back into focus.

Looking ahead, in our view, industrial metals may face some headwinds in H2 2025, as frontloaded goods and export demand fades, while higher tariffs weigh on global industrial production. That said, China remains the wild card. For now, strong exports have kept Beijing on the sidelines, but once export momentum cools, stimulus could return—potentially lifting metal demand later in the year. There was no need for stimulus in recent years, but as visible in Figure 2, China has ammunition to stimulate the economy. And once they do, industrial metals are likely the ones to profit.

Medium-term, the backdrop remains constructive. Additionally, global metal inventories are low, leaving little cushion for the next industrial upswing—expected in 2026. When that rebound arrives, metals could shine once again. Due to this, we still believe that at some point in Q4, industrial metals will see an upswing in prices and provide a good entry point for an overweight position.

Gold & Precious metals

Gold has been trading sideways around 3’350 USD/ounce since mid-May, caught in a holding pattern as policy and trade uncertainties remain high, but do not crawl higher. This perceived “peak uncertainty” has taken some shine off from gold’s safe-haven appeal, capping its ascent toward new highs.

However, we believe the story isn’t over yet. We expect the next few months to bring a fresh wave of safe-haven demand, driven by renewed trade tensions, geopolitical flashpoints, and growing fiscal concerns—particularly around the so-called “Big Beautiful Bill.” There is little doubt about continued USD weakness, which favours gold.

Linked to that, the global shift away from fiscal austerity is drawing investor attention back to sovereign credit risk. In such an environment, the zero-yield nature of gold becomes less of a drawback and more of a feature, offering a hedge with no counterparty exposure. Another bullish catalyst could emerge if the US Fed kicks off its expected rate-cutting cycle, likely beginning in Q4. Recent Fed commentary suggests growing openness to easing, especially as tariffs appear to be having minimal impact on consumer prices so far. While the labour market remains firm, we expect it to soften in H2 alongside slowing GDP growth, paving the way for rate cuts. Finally, central banks continue to provide a solid backstop, with gold purchases estimated at around 1,000 tonnes annually. Their consistent “buy-the-dip” behavior is likely to cushion any pullbacks, keeping a firm floor at around 3,000 USD per ounce. As a result, we believe that gold’s ascent is far from over. We see gold touching 3,500 USD in the next couple of months.

Silver and platinum have stolen the spotlight from gold over the past two months. But beneath the excitement, there is some short-term caution around the latest moves. They seem more sentiment-driven than fundamentally sound. Taking silver as example, 60% of demand remains industrial, with solar panel production playing a major role for demand growth in recent years. However, regulatory shifts in China’s solar sector are likely to trigger a significant demand slowdown in the coming months—posing some headwind for silver.

As for platinum, Chinese demand is currently booming, buoyed by reports of a shift in jewellery preferences from gold to platinum, along with strong investor inflows. But again, the rally seems to have overshot fundamentals, and fundamentals matter for platinum vs. gold. We base our position on the fact that we have not seen a substitution from gold jewellery towards platinum so far. Long-term, we do like silver and platinum as they are both widely applied in the energy transitions and they both show a supply deficit. But for now, we remain cautious and stick to our overweight gold position.

Grains

After underperforming the broader commodity complex in the first half of 2025, thanks to favorable weather, grains are gearing up for a more volatile second half, packed with both upside potential and downside risk. Near-ideal spring weather is setting the stage for a potential record US corn harvest—just as Brazil's crop shows signs of being 20% larger than last year. That’s a lot of supply heading to market.

For soybeans, trade dynamics take centre stage. A potential US–China trade deal could reignite demand for US beans, with China being the world’s top buyer. However, last year’s disappointing Brazilian crop gives Beijing plenty of alternative sourcing options. Still, US agricultural products remain competitively priced, and President Trump has made it clear he sees agriculture as a cornerstone of trade negotiations. As future positioning held by money managers remains short, any mentioning of grains purchases from the US within trade deals will lead to a rally in grains. Also, at the moment, there is no weather risk premium priced into grains, which can introduce a lot of volatility going forward, if weather conditions deteriorate. Despite current abundant supply and weak short-term performance, we see a possible recovery in the medium term.

Conclusion

To summarize, we remain constructive gold, which we keep preferring to the others in the precious complex. Further, we are establishing an underweight in oil, as geopolitical tensions ease, and a supply wave is expected to hit markets soon. We remain cautious and selective on both base metals and grains.