UBS Strategists Predict Major Commodity Sector Recovery by 2025
UBS strategists are forecasting a positive outlook for major commodity sectors, with expectations of a sector-wide recovery and growth into 2025. Despite recent weak performance in most categories, UBS predicts total returns of at least 10% for the UBS CMCI over the next 6-12 months.
The energy sector has been under pressure due to macroeconomic concerns and reduced refinery activity, leading to lower crude imports from China and multi-month lows in oil prices. However, UBS believes the market is due for a rebound, citing rising compliance among OPEC+ members and declining global oil inventories as key drivers for a potential oil price surge to over $80 per barrel.
The industrial metals sector has also been affected by disappointing data from China, but UBS remains bullish on this sector due to the ongoing energy transition. With an estimated $100 trillion needed for the transition to a net-zero global economy by 2050, industrial metals like copper, lithium, and aluminum are expected to see double-digit returns over the next year.
Gold has remained resilient in 2024, and UBS expects further price increases as central banks continue to build reserves and Fed rate cuts stimulate demand from ETF investors. UBS maintains its forecast for gold prices to reach $2,700 per ounce by mid-2025, with silver also expected to benefit from improving industrial production.
UBS remains cautiously optimistic about agricultural commodities, highlighting weather-related risks in Latin America and favorable supply-demand dynamics. Despite mixed performance, some soft commodities like sugar are expected to see low double-digit percentage price increases over the next six months.
In conclusion, investors should keep an eye on the commodity markets as UBS anticipates positive returns and growth opportunities in the coming months. With the potential for significant price increases in oil, gold, silver, and industrial metals, diversifying a portfolio to include exposure to these sectors could lead to profitable investment outcomes.