Analysts at Saxo Bank projected a rebound in commodity prices, especially for metals, in the second quarter of 2024, with gold prices anticipated to reach $2,500 per ounce.
Copper, another metal which has been seeing a surge in demand in recent months, is also projected to see new highs in price in the current quarter.
“We maintain our 2024 call on gold to reach $2,300 per ounce, with potentially climbing as high as $2,500,” Ole Hansen, Saxo’s Head of Commodity Strategy, said in its quarterly outlook for 2024 report.
“Copper, dubbed the ‘King of Green Metals’, is also on track for success, driven by steady demand and the threat of supply disruptions,” Hansen report said.
Lower funding costs and economic support measures in places like China could further bolster the market for selected industrial metals, setting the stage for a broader commodities rebound, the report said.
Saxo said the commodities market is showing signs of recovery after the year-long consolidation period that followed a significant growth spurt from 2020 to 2022.
“This potential turnaround is buoyed by the anticipation of rate cuts from major central banks, which may soften the US dollar and reduce funding costs, thereby fuelling growth.
“Notably, the metals sector, particularly gold and silver, has already started to rebound, benefiting from robust demand and the prospect of more favourable financial conditions,” it said.
Saxo, however, cautioned investors to be on their guard as the current wave of optimism in the stock market, driven by election fever in many major countries, hides a more uncomfortable truth.
“It’s all about elections and keeping the status quo”, Steen Jakobsen, Saxo’s Chief Investment Officer, said in his macro note.
“Election optimism and a rally in equities have so far masked the inconvenient truths underlying our economy, where debt continues to grow faster than GDP,” he said.
“Our economy is in a delicate state, with debt accumulation outpacing GDP growth. Central banks around the globe are tightening the purse strings, which, when combined with high real interest rates and the mountain of existing debt, could spell trouble for our economic momentum,” the report said.
On the equity market scenario, Saxo said in the whirlwind of market dynamics, the fervour around artificial intelligence (AI) and innovative obesity treatments has notably altered investment landscapes.
“The valuation of companies like Nvidia and Novo Nordisk has skyrocketed, underpinning a speculative boom reminiscent of past market bubbles.
“This speculative fever, alongside a complex backdrop of economic indicators, suggests a pivotal moment for investors, encouraging a nuanced and more neutral approach towards US equities in anticipation of potential valuation adjustments,” it said.
Saxo said as Q2 2024 unfolds, it is important to have a balanced and strategically diversified approach to investment.
“With a year full of major elections, it isn’t just about playing the markets, but rather recognising the narrative driving investor sentiment,” Jakobsen said in his note.
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