This year is poised to have various influences impact on commodity markets, including Donald Trump’s re-election as US President, says private baking organisation Ninety One.

In unpacking the organisation’s outlook for the year, Ninety One global natural resources co-portfolio manager George Cheveley says although 2024 was a “relatively quieter” year for resource markets compared with the volatility of prior years, this year will see concerns over Trump’s tariff policies and China’s response.

Geopolitical tension often supports gold demand, which Ninety One predicts will remain strong at prices above $2 500/oz.

Cheveley explains, however, that the risks are heavily skewed to the upside, making a breakout higher more likely than a decline. A bearish scenario for gold would involve strong US economic growth, improved US-China relations, a stronger dollar, and low inflation. However, he does deem that scenario as unlikely at this point.  

“We see remaining range-bound for now, with a potential risk of weakness in the first half of the year. However, as the year progresses, we expect fundamentals to tighten, possibly more than most anticipate,” Cheveley states.

Coordinated actions by the Organization of the Petroleum Exporting Countries (Opec) have effectively removed the downside tail risk, providing strong support to the market. That said, the key wildcard is how tariffs might impact oil demand, which remains difficult to predict at this stage.

For context, Opec’s extended production cuts last year kept oil prices relatively stable at about $70/bl.

“Ahead of Trump’s administration, the market has been dominated by discussions around tariffs and the uncertainty about which tariffs will be implemented and where,” Cheveley says.

He adds that once those details emerge, Ninety One expects China to respond competitively by driving economic growth, as the authorities will aim to counterbalance the US. As a result, the world could see both economies striving to grow strongly.

Looking into 2025, the mining sector continues to represent an attractive investment opportunity, as structural market dynamics support the value opportunity, including: growing demand for critical minerals by electrification technologies, pre-emptive underinvestment in traditional energy, and inflation hedging characteristics of non-recurring engineering sectors, such as energy generation and energy trading.

The current market uncertainty has led to a sense of apathy, but this presents investment opportunities, Cheveley elaborates.

Despite high spot prices for some commodities, equities are often priced lower, creating a potential upside. In metals and mining, valuations often do not fully reflect the upside risks, potentially leading to increased merger and acquisition activity, similar to trends observed from 2001 to 2007.

A similar dynamic played out between 2001 and 2007, and it could potentially return.

“In other areas, we see opportunities in the midstream market in the US, driven by rising US gas volumes. Although we expect oil to remain range-bound for now, with a potential risk of weakness in the first half of the year. As the year progresses, we expect fundamentals to tighten, possibly more than anticipated,” Cheveley states.

That said, the wildcard is how tariffs might impact on oil demand, which remains difficult to predict at this stage.

Long-term investors should consider holding natural resource equities, as inflation is expected to average higher in the next decade compared with the previous 15 years, making them an effective hedge.

Ninety One says current valuations are not stretched and that, in fact, in many cases, they appear quite low. Simultaneously, many resource companies are defensively positioned with strong balance sheets.

“We are currently seeing the start of a turning point in the capital expenditure cycle after years of underinvestment.

“For example, power grid investment in the US to support artificial intelligence is picking up, and in Asia (excluding China), we see promising growth prospects that should increasingly offset any slowdown in China’s growth and infrastructure spending,” Cheveley explains.

He concludes that inventory levels for many commodities remain low, meaning any unexpected uptick in demand could have a rapid and significant impact on prices.