Investing.com — Commodities including gold oil and copper have staged a meteoric rally and could be on track for more gains, supported by positive fundamentals including demand amid supply and geopolitical concerns and possible future rate cuts in the USA
“[W]We see higher commodity prices on the horizon and expect total returns of around 10% for the broad commodity indices over the next six to 12 months,” UBS analysts said in a note on Tuesday, adding that the broad commodity index UBS CMCI Composite Index rose by almost 11 percent has increased. % year to date.
Oil demand remains strong
remains the preferred commodity to gain exposure to, UBS said, downplaying recent oversupply concerns as OPEC+ members tighten their adherence to voluntary supply cuts of 2.2 million barrels per day (mbpd).
“OPEC crude oil exports in the first 19 days of May were at their lowest level since August 2023, and compliance with the OPEC+ production cut agreement remains important,” UBS said.
On the demand front, real-time mobility data indicates healthy oil demand, says UBS, which forecasts growth of 1.5 million barrels per day this year, above the long-term annual growth rate of 1.2 mbpd.
Gold to keep shining
The stellar first quarter, meanwhile, is likely to continue with central bank purchases, especially from the People’s Bank of China. of the yellow metal is likely to continue at a time when demand for protection against geopolitical uncertainties is increasing.
Demand for gold as a hedge should remain healthy, UBS added, amid geopolitical uncertainties due to wars in the Middle East and trade tensions between the US and China.
Gold is also likely to get a boost from Federal Reserve rate cuts expected later this year, UBS, increasing inflows into gold exchange-traded funds.
Stay long buyer, buy on dips as supply gets in the way of the red metal challenge
have accelerated since the short squeeze took prices to record highs, but positive fundamentals, including limited supply, remain intact, UBS says, and prices will reach $11,500 per tonne, and $12,000/mt, by the end of the year or more by mid-2025.
“We recommend investors remain long the metal and add more dips,” UBS added, signaling a lack of progress in solving the metal’s supply-side challenges. “China’s renewed policy emphasis on stabilizing housing should support investor interest,” UBS added.
