Key commodity sectors to bottom out in coming months, says UBS

UBS strategists predict that major commodity sectors will bottom out in the coming months, as current market challenges start to ease. 

Despite weak performance in most commodity categories—except precious metals—the outlook remains positive, with expected sector-wide recovery and growth into 2025. 

“Over 6-12 months, we forecast total returns of at least 10% for the UBS CMCI,” the analysts said.

The energy sector, particularly crude oil, has been under pressure due to a combination of macroeconomic concerns in the US and Europe, as well as reduced oil refinery activity and lower crude imports from China. 

This has led speculators to push oil prices to multi-month lows. However, UBS believes the market has become overly complacent and forecasts a rebound in oil prices.

Key drivers of the expected recovery include rising compliance among OPEC+ members and a consistent decline in global oil inventories. UBS expects oil prices to surpass $80 per barrel as global interest rate cuts help alleviate recession risks​.

The industrial metals sector has been similarly affected by disappointing data from China, particularly in its property and credit markets. 

However, UBS remains bullish on this sector, pointing to the ongoing energy transition as a significant catalyst for growth. 

The transition to a net-zero global economy will require an estimated $100 trillion by 2050, with industrial metals such as copper, lithium, and aluminum playing a foundational role in electrification and renewable energy projects​.

UBS analysts anticipate double-digit returns for industrial metals over the next 12 months, driven by increasing demand for these materials to support decarbonization efforts.

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. 

The brokerage maintains its forecast for gold prices to reach $2,700 per ounce by mid-2025.

Silver, often moving in tandem with gold, is also expected to benefit from improving industrial production. UBS sees silver as having strong catch-up potential in the months ahead​.

UBS remains cautiously optimistic about agricultural commodities, citing weather-related risks in Latin America and favorable supply-demand dynamics. 

Despite mixed performance, some soft commodities, such as sugar and live cattle, are expected to see low double-digit percentage price increases over the next six months. UBS has a moderate overweight recommendation in this sector.