HSBC forecast on Tuesday (Jan 2) that squeezed supply, improved Chinese demand and the global energy transition will keep commodity prices elevated in 2024, before falling the following year.

“We forecast commodity prices to rise by an average of 2 per cent in 2024 and fall by 4 per cent in 2025,” HSBC wrote in a note.

HSBC expects China’s growth recovery and ongoing supply constraints will keep commodity prices supported this year.

It said geopolitical risks and expectations of looser monetary policy in the second half of 2024 will add to the upside, while downside risks include the ongoing slowdown in global growth.

Cocoa and iron ore prices surged in 2023, while natural gas and coal prices tumbled, with most agricultural products expected to outperform energy and industrial metals in the New Year amid supply constraints and dry weather.

HSBC projected Brent to average US$82.5 per barrel and US Henry Hub natural gas prices to average US$3.75 per million British thermal units.

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Crude futures lost more than 10 per cent in 2023 during a tumultuous year of trading marked by geopolitical turmoil and concerns about oil output levels of major global producers.

US natural gas futures recorded their biggest percentage fall for the year since 2006, under pressure from record production, ample inventories in storage and relatively mild weather conditions.

HSBC also predicts gold prices will average US$1,825 an ounce in 2024, predicting the first rate cut from the Federal Reserve in June 2024.

Gold investors anticipate record high prices this year, when the fundamentals of a dovish pivot in US interest rates, continued geopolitical risk, and central bank buying are expected to support the market. REUTERS