Key Commodity Forecast for Q3 2024 by Investing

As the global economy faces ongoing challenges, attention is being directed toward the trends of key commodities as we approach the third quarter (Q3) of 2024.

Precious metals, including gold and silver, have experienced significant gains this year, with many analysts predicting that this upward trend will persist.

### Gold Price Forecast

In a recent message to clients, Nikos Tzabouras, a Senior Financial Editorial Writer, indicated that ongoing geopolitical tensions, upcoming elections, and uncertain global monetary policies could drive safe-haven investment flows toward gold. He noted that strong buying activity from central banks in emerging economies, particularly China, as part of its de-dollarization efforts, could push gold prices to new record highs.

However, Tzabouras also cautioned that the Federal Reserve’s reluctance to lower interest rates bolsters the U.S. dollar. The dollar’s strength enhances its appeal as a reserve currency, potentially dampening gold’s upward momentum.

### Is Oil Consumption Falling?

Tzabouras anticipates a sharp decrease in oil consumption this year, influenced by the drive for net-zero emissions and the rise of electric vehicles (EVs). He mentioned that supply is set to increase from non-OPEC countries, including the U.S., which is on track for record production levels. While this unfavorable combination placed pressure on prices in the second quarter, he believes a rebound is likely in the third quarter.

He added that the market could tighten in the coming months due to the extension of substantial OPEC+ production cuts. Despite the outlook for recovery, he emphasized that reaching $100 per barrel is unlikely, as such prices could lead to a demand downturn.

### Copper Supply Expectations

Copper has reached unprecedented highs this year, but Tzabouras suggests that supply-demand dynamics are likely to drive further gains. He noted that consumption is expected to rise, as copper is essential for both the artificial intelligence sector and the transition to clean energy. Nevertheless, supply has tightened significantly, with major mining companies reducing their production targets. Potential risks include challenges in China’s property sector and a slowdown in EV adoption.

### Natural Gas Price Forecast

Demand for natural gas is projected to grow substantially this year, primarily driven by industrial use in Asia. However, the supply situation is more complicated, as major producers have lowered their output expectations. Tzabouras remarked that natural gas experienced a rally in the second quarter, with improved fundamentals possibly supporting further increases.

He also indicated that natural gas remains relatively insulated from the impacts of the shift away from fossil fuels, as it is often viewed as a transitional energy source. However, he identified potential challenges, including reduced consumption in Europe and unseasonably warm weather. Additionally, uncertainties surrounding China’s recovery and India’s economic growth may pose risks.

### Should Investors Focus on Commodities?

Nikos Tzabouras’ analysis reveals a complex landscape for the commodities market in Q3. While certain commodities such as copper and natural gas appear set for growth due to supply constraints and increasing demand, others like oil are navigating challenges between potential rebounds from production cuts and decreased demand in the context of the energy transition.

Commodity futures can serve as a hedge against inflation and a means to diversify investment portfolios beyond traditional assets like stocks and bonds. These contracts allow investors to speculate on price movements of essential commodities, creating opportunities for significant returns.