Commodities
UBS sees near 20% upside potential in silver prices over the next year
Investing.com — continues to shine as an attractive asset for investors, driven by a mix of favorable macroeconomic factors.
As per analysts at UBS, silver prices could see a significant rally, with a potential upside of nearly 20% over the next 12 months.
The report mentions a combination of monetary easing, industrial demand recovery, and growing investor interest through ETFs as key factors that could propel prices higher.
Currently, silver is hovering around USD 32/oz, supported by global monetary policy easing and a weaker US dollar.
The recent decision by the Federal Reserve to cut rates by 50 basis points has instilled confidence in the markets that real rates will decline further.
This environment of lower real rates is expected to bolster economic growth and fuel industrial demand for silver, which plays a critical role in sectors such as electronics, renewable energy, and medical technology.
At the same time, the weakening of the US dollar, a common consequence of falling rates, typically supports higher silver prices.
UBS forecasts that these dynamics will push silver to new highs, potentially reaching $36-38/oz by next year.
In addition to the influence of central banks, the broader recovery in global manufacturing is set to boost the demand for silver.
As production picks up across various industries, the need for silver in industrial applications will likely increase, adding further upward pressure on prices.
UBS notes that this rebound in manufacturing activity, combined with a more favorable interest rate environment, could lead to greater inflows into silver-focused exchange-traded funds.
China’s economic policies are another critical factor in the bullish outlook for silver. The Chinese government has implemented a range of stimulus measures aimed at reviving its economy, which has been under strain in recent years.
Given that China is one of the world’s largest consumers of silver, particularly for industrial use, these policies could provide a strong tailwind for silver prices.
UBS believes that if these measures are successfully implemented and followed up with additional initiatives, they could significantly bolster demand for commodities like silver.
While silver has traded within a $26-32/oz range since the second quarter of this year, UBS expects this sideways movement to give way to a broader uptrend.
The strategists foresee silver breaking out of this range and embarking on a more sustained rally, with a target price of $36-38/oz. The combination of rate cuts, monetary easing, and rising industrial demand sets the stage for silver to achieve these higher levels.
However, the analysts also caution that several risks could challenge their bullish outlook. One key risk is that the market has already priced in many of the expected rate cuts from the Federal Reserve.
Any unexpectedly strong economic data, such as a positive payroll report, could temporarily strengthen the US dollar, putting downward pressure on silver prices.
Additionally, while China has introduced numerous stimulus measures, not all have been successful in sparking a meaningful economic recovery.
If consumer demand in China does not pick up, the rally in silver and other commodities could lose momentum.
Furthermore, speculative positions in silver futures remain elevated, and a lack of positive news could prompt a pullback in these positions, dampening silver’s short-term prospects.
“For investors who are less confident of a rally in silver prices, we believe selling the downside for a yield pickup offers an alternative avenue to take silver exposure,” the analysts said.
Commodities
Natural gas prices outlook for 2025
Investing.com — The outlook for prices in 2025 remains cautiously optimistic, influenced by a mix of global demand trends, supply-side constraints, and weather-driven uncertainties.
As per analysts at BofA Securities, U.S. Henry Hub prices are expected to average $3.33/MMBtu for the year, marking a rebound from the low levels seen throughout much of 2024.
Natural gas prices in 2024 were characterized by subdued trading, largely oscillating between $2 and $3/MMBtu, making it the weakest year since the pandemic-induced slump in 2020.
This price environment persisted despite record domestic demand, which averaged over 78 billion cubic feet per day (Bcf/d), buoyed by increases in power generation needs and continued industrial activity.
However, warm weather conditions during the 2023–24 winter suppressed residential and commercial heating demand, contributing to the overall price weakness.
Looking ahead, several factors are poised to tighten the natural gas market and elevate prices in 2025.
A key driver is the anticipated rise in liquefied natural gas (LNG) exports as new facilities, including the Plaquemines and Corpus Christi Stage 3 projects, come online.
These additions are expected to significantly boost U.S. feedgas demand, adding strain to domestic supply and lifting prices.
The ongoing growth in exports to Mexico via pipeline, which hit record levels in 2024, further underscores the international pull on U.S. gas.
On the domestic front, production constraints could play a pivotal role in shaping the price trajectory.
While U.S. dry gas production remains historically robust, averaging around 101 Bcf/d in 2024, capital discipline among exploration and production companies suggests a limited ability to rapidly scale output in response to higher prices.
Producers have strategically withheld volumes, awaiting a more favorable pricing environment. If supply fails to match the anticipated uptick in demand, analysts warn of potential upward repricing in the market.
Weather patterns remain a wildcard. Forecasts suggest that the 2024–25 winter could be 2°F colder than the previous year, potentially driving an additional 500 Bcf of seasonal demand.
However, should warmer-than-expected temperatures materialize, the opposite effect could dampen price gains. Historically, colder winters have correlated with significant price spikes, reflecting the market’s sensitivity to heating demand.
The structural shift in the U.S. power generation mix also supports a bullish case for natural gas. Ongoing retirements of coal-fired power plants, coupled with the rise of renewable energy, have entrenched natural gas as a critical bridge fuel.
Even as wind and solar capacity expand, natural gas is expected to fill gaps in generation during periods of low renewable output, further solidifying its role in the energy transition.
Commodities
Trump picks Brooke Rollins to be agriculture secretary
WASHINGTON (Reuters) -U.S. President-elect Donald Trump has chosen Brooke Rollins (NYSE:), president of the America First Policy Institute, to be agriculture secretary.
“As our next Secretary of Agriculture, Brooke will spearhead the effort to protect American Farmers, who are truly the backbone of our Country,” Trump said in a statement.
If confirmed by the Senate, Rollins would lead a 100,000-person agency with offices in every county in the country, whose remit includes farm and nutrition programs, forestry, home and farm lending, food safety, rural development, agricultural research, trade and more. It had a budget of $437.2 billion in 2024.
The nominee’s agenda would carry implications for American diets and wallets, both urban and rural. Department of Agriculture officials and staff negotiate trade deals, guide dietary recommendations, inspect meat, fight wildfires and support rural broadband, among other activities.
“Brooke’s commitment to support the American Farmer, defense of American Food Self-Sufficiency, and the restoration of Agriculture-dependent American Small Towns is second to none,” Trump said in the statement.
The America First Policy Institute is a right-leaning think tank whose personnel have worked closely with Trump’s campaign to help shape policy for his incoming administration. She chaired the Domestic Policy Council during Trump’s first term.
As agriculture secretary, Rollins would advise the administration on how and whether to implement clean fuel tax credits for biofuels at a time when the sector is hoping to grow through the production of sustainable aviation fuel.
The nominee would also guide next year’s renegotiation of the U.S.-Mexico-Canada trade deal, in the shadow of disputes over Mexico’s attempt to bar imports of genetically modified corn and Canada’s dairy import quotas.
Trump has said he again plans to institute sweeping tariffs that are likely to affect the farm sector.
He was considering offering the role to former U.S. Senator Kelly Loeffler, a staunch ally whom he chose to co-chair his inaugural committee, CNN reported on Friday.
Commodities
Citi simulates an increase of global oil prices to $120/bbl. Here’s what happens
Investing.cm — Citi Research has simulated the effects of a hypothetical oil price surge to $120 per barrel, a scenario reflecting potential geopolitical tensions, particularly in the Middle East.
As per Citi, such a price hike would result in a major but temporary economic disruption, with global output losses peaking at around 0.4% relative to the baseline forecast.
While the impact diminishes over time as oil prices gradually normalize, the economic ripples are uneven across regions, flagging varying levels of resilience and policy responses.
The simulated price increase triggers a contraction in global economic output, primarily driven by higher energy costs reducing disposable incomes and corporate profit margins.
The global output loss, though substantial at the onset, is projected to stabilize between 0.3% and 0.4% before fading as oil prices return to baseline forecasts.
The United States shows a more muted immediate output loss compared to the Euro Area or China.
This disparity is partly attributed to the U.S.’s status as a leading oil producer, which cushions the domestic economy through wealth effects, such as stock market boosts from energy sector gains.
However, the U.S. advantage is short-lived; tighter monetary policies to counteract inflation lead to delayed negative impacts on output.
Headline inflation globally is expected to spike by approximately two percentage points, with the U.S. experiencing a slightly more pronounced increase.
The relatively lower taxation of energy products in the U.S. amplifies the pass-through of oil price shocks to consumers compared to Europe, where higher energy taxes buffer the direct impact.
Central bank responses diverge across regions. In the U.S., where inflation impacts are more acute, the Federal Reserve’s reaction function—based on the Taylor rule—leads to an initial tightening of monetary policy. This contrasts with more subdued policy changes in the Euro Area and China, where central banks are less aggressive in responding to the transient inflation spike.
Citi’s analysts frame this scenario within the context of ongoing geopolitical volatility, particularly in the Middle East. The model assumes a supply disruption of 2-3 million barrels per day over several months, underscoring the precariousness of energy markets to geopolitical shocks.
The report flags several broader implications. For policymakers, the challenge lies in balancing short-term inflation control with the need to cushion economic output.
For businesses and consumers, a price hike of this magnitude underscores the importance of energy cost management and diversification strategies.
Finally, the analysts cautions that the simulation’s results may understate risks if structural changes, such as the U.S.’s evolving role as an energy exporter, are not fully captured in the model.
While the simulation reflects a temporary shock, its findings reinforce the need for resilience in energy policies and monetary frameworks. Whether or not such a scenario materializes, Citi’s analysis provides a window into the complex interplay of economics, energy, and geopolitics in shaping global economic outcomes.
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