Investors will need to be tactical to harvest returns from commodities next year but there is an area where J.P. Morgan is making a broadly bullish call — precious metals. The firm expects a breakout rally the middle of 2024 with gold prices hitting a targeted peak of $2,300 an ounce, according to the investment bank’s commodities outlook. Slowing U.S. GDP growth will solidify expectations that the Federal Reserve will slash rates to head off a recession, with a cutting cycle equal to 100 basis points in the second half of 2024 pushing gold prices to new nominal highs, according to J.P. Morgan. Though gold is vulnerable to retreat toward the $1,900 range in the coming months, this sets investors up to position themselves for the midyear rally, according to the investment bank. Silver, meanwhile, will push above $30 per ounce on the rate cutting cycle, according to J.P. Morgan. Gold was trading at a spot price around $2,036 Thursday while silver was trading around was trading round $25. The rally in precious metals is expected to deliver 6% return for the Bloomberg Commodity Index (BCOM) for Precious Metals by the end of 2024 from current levels, according to the J.P. Morgan analysts. When it comes to commodities, they cautioned investors to be tactical in 2024. The global economy is expected to slow, but will avoid a recession from 2024 to 2025, making it difficult to provide an overarching bullish or bearish call on commodities, according to the bank. Commodities are unlikely to benefit from inflation next year with core inflation expected to fall to 2.9%. There is value in oil and gas but how investors time their entry and exits will be critical, according to J.P. Morgan. Demand will support a price of $80 to $90 for a barrel of Brent crude, with prices peaking in the late third quarter at $10 above the current spot price. And natural gas prices on the New York Mercantile Exchange are forecast to increase by 44% by year end from the current spot price on solid demand growth, though the bullish narrative won’t materialize until the second half of 2024. J.P. Morgan forecasts the BCOM Energy Index will decline in the first two quarters of next year but deliver an 8% return in the third quarter and ultimately finish out the year with a 10% return. On agricultural commodities, the bank has a bullish outlook on sugar with more modest gains across grains, oil seeds and the cotton market throughout 2024. The BCOM Agriculture and Livestock Index is forecast to deliver peak returns of 8% in the second and third quarters before declining to 5% at year end. Base metals, on the other hand, will be stuck in their current range for the majority of 2024 but will find a stronger footing in 2025 as demand recovers outside China, according to the bank.
