2024 Commodity Markets: Precious Metals and Agricultural Commodities Produce Standout Performance
The commodity markets in 2024 exhibited significant volatility, characterized by notable divergences across different sectors. The year was marked by record-breaking performances in certain agricultural commodities, like cocoa and coffee, while traditional stalwarts in the energy sector faced persistent headwinds. Precious metals also benefited from geopolitical tensions, while shifting economic conditions and severe weather events emerged as the primary drivers of price movements across commodity classes.
Energy Commodity Price Performances Diverge
The energy sector presented a mixed picture in 2024. Crude oil markets experienced downward pressure, with Brent crude declining 4.5% and WTI crude dropping 3% over the year. This weakness was primarily attributed to China’s underwhelming economic performance, which dampened global demand expectations.
Lower-than-expected Chinese demand was the dominant bearish influence on oil prices throughout 2024. The world’s largest oil importer experienced significant economic headwinds, characterized by declining industrial output, rising unemployment, and a troubled property sector. Despite multiple stimulus packages announced by Beijing, oil import growth failed to meet market expectations.
The US presidential election also introduced new dynamics into the oil market, particularly following Donald Trump’s victory in November. While Trump’s stated commitment to expanding fossil fuel production initially suggested potential support for oil prices, the market response was tempered by several factors. His proposed trade policies, specifically the pledge to implement a 25% tariff on Mexican and Canadian imports and an additional 10% tariff on Chinese goods, raised concerns about potential impacts on US domestic oil demand.
Despite initial market speculation about a return to aggressive US production growth under the Trump administration, industry leaders, including Exxon’s CEO, indicated that production increases would remain contingent on international price levels rather than political factors.
OPEC+ made several crucial decisions, notably extending production cuts until the end of 2026 and establishing a target of 39.7 million barrels per day (bpd) for 2025 and 2026. This included maintaining the existing 2 million bpd production cut through December 31, 2026.
US natural gas prices reached their lowest inflation-adjusted annual average in 2024, with sustained low prices in the US market primarily attributed to robust domestic production and demand constraints. The Henry Hub natural gas spot price in the US averaged $2.21 per million British thermal units (MMBtu) in 2024, a significant 16% decrease from 2023 levels and a 68% decline from 2022. However, the US natural gas benchmark futures experienced a significant advance during the year, rising by over 50%—a sharp divergence from spot prices.
Moreover, at the end of the year, international benchmark futures reached $3.66/MMBtu in Asian markets – the highest level since January 2023. This 40% year-to-date increase reflected the growing concerns in the market regarding winter heating demand in the northern hemisphere, particularly in Europe, China, and Japan, where below-average temperatures were forecast.
The global supply landscape continued to evolve in 2024, with the US and Norway emerging as primary suppliers to European markets following the reduction in Russian gas flows. The long-term outlook remains supported by structural factors, particularly the projected one-third increase in global power demand over the next decade.
Precious Metals
Gold and silver emerged as standout performers in 2024, each recording gains exceeding 25%. Gold achieved historic highs across multiple currencies, including the US dollar, Japanese yen, Indian rupee, Chinese yuan, and Australian dollar. The precious metals sector benefited from strong central bank purchases and growing safe-haven demand.
The gold price peaked at $2,777.80 per ounce on October 30, with its remarkable performance establishing it as a leading asset across all major investment classes and reinforcing its role as an effective portfolio diversifier.
A primary driver of gold’s impressive rally was unprecedented demand from central banks, particularly in emerging markets. Countries such as Russia, China, and Turkey significantly increased their gold reserves, partly motivated by concerns about potential sanctions following the precedent set with Russia in 2022.
The retail segment introduced new dynamics to gold markets in 2024. Notable developments included Costco’s entry into gold bar sales, with the retailer repeatedly selling out of inventory. In China, a trend emerged among young adults purchasing “gold beans,” contributing to increased retail demand. These developments reflected growing accessibility of gold investment products to retail investors and demonstrated the broadening appeal of gold across different investor demographics.
Looking ahead to 2025, market sentiment remains constructive, with Goldman Sachs projecting potential prices reaching $3,000 per ounce. This optimistic outlook is supported by several factors: continued central bank purchasing, persistent geopolitical tensions, and anticipated shifts in monetary policy. However, market consensus suggests more moderate performance than 2024’s exceptional gains, with upside catalysts potentially emerging as the year progresses.
Silver demonstrated remarkable strength in 2024, recording a 28.70% gain through November and reaching $30.63 per ounce, outperforming many other commodities on the back of industrial demand growth, supply constraints, and investment interest.
Industrial applications emerged as a primary driver of silver demand, accounting for approximately 55% of global consumption. The renewable energy sector played a particularly significant role, with silver demand for solar panels increasing by 158% from 2019 to 2023, followed by an additional 20% growth in 2024.
The market’s supply side faced significant challenges, with global production remaining largely stagnant since 2014. The Silver Institute reported a 1% decline in supply for 2024, highlighting the ongoing challenges in meeting growing demand. Declining ore grades, higher production costs, and limited exploration success exacerbated these supply constraints.
Investment interest in silver strengthened throughout 2024, driven by its traditional role as a hedge against currency devaluation and store of value. Meanwhile, silver’s role in emerging technologies continued to expand in 2024, with increasing demand from electric vehicle components, 5G networks, and consumer electronics.
Silver prices are expected to be supported by several structural factors, including the ongoing transition to renewable energy technologies, particularly solar power, suggests growth in industrial demand. Supply constraints appear likely to persist without significant new mine discoveries or expansions, potentially supporting prices.
Industrial Metals – Chinese Lacklustre Demand Counters AI and Green Energy Needs
The base metals sector experienced a year of two distinct halves. After starting 2024 as one of the weakest-performing asset classes, the sector experienced a significant turnaround by mid-May, driven by increasing demand for metals used in artificial intelligence and green energy applications.
Zinc increased 15%, while copper and aluminium posted modest gains of 5% to 7%. However, the momentum was tempered by declining global manufacturing activity and disappointing economic data from China in the latter half of the year.
Copper ultimately ended the year 7.66% higher despite considerable market turbulence, structural supply constraints and shifting market sentiment, with prices reaching a historic peak of US$5.11 per pound in May before moderating in the latter half of the year.
Persistent tightness in the concentrate market was a significant factor supporting copper prices throughout 2024. Treatment charges remained well below historical norms, hovering between US$20 to US$30 per metric ton compared to US$80 in 2023. Despite these constraints, global mined production showed modest growth, increasing by 2% year-on-year to 14.86 million metric tons through August 2024.
China’s economic challenges emerged as a significant headwind for copper prices, particularly in the last half of 2024. Despite multiple stimulus measures, the country’s weak property sector and broader economic slowdown weighed on market sentiment. As the world’s largest copper consumer, China’s economic health remained crucial to price direction, though refined copper imports did show a modest 0.5% increase.
Looking ahead to 2025, the copper market faces several key considerations:
- The impact of President-elect Trump’s policies, particularly regarding renewable energy subsidies and infrastructure spending
- The effectiveness of China’s stimulus measures in addressing structural economic challenges
- Continued supply tightness in the concentrate market as new refining capacity comes online
- Growing demand from energy transition sectors, despite potential policy shifts
- The ongoing challenge of bringing new mine supply to market amid rising demand
The interplay of President Trump’s policies regarding renewable energy subsidies and the performance of the China economy suggesting continued price volatility in 2025, with supply constraints providing underlying support.
Iron ore markets experienced significant downward pressure in 2024, with prices declining more than 15% despite record global seaborne trade volumes.
Global seaborne iron ore imports reached a record 1.707 billion metric tons in 2024, representing a 3.6% increase from 2023. However, this growth was almost entirely attributable to China, which increased its imports by 59.1 million tons to reach 1.274 billion tons – a 4.9% year-over-year gain. This concentration of demand growth in a single market underscored the market’s vulnerability to Chinese economic conditions. Looking ahead to 2025, supply-side dynamics suggest further potential pressure on prices.
Agricultural Commodities – Cocoa and Coffee Prices Shoot the Lights Out
The agricultural sector witnessed some of the most dramatic price movements of 2024. Cocoa emerged as the year’s top-performing commodity, nearly tripling in price to reach $12,931 per metric ton. This significant rally was driven by severe supply deficits in West Africa, marking the fourth consecutive season of shortages. Coffee prices also soared, with Arabica reaching $3.5 per pound, a 70% increase that brought prices to levels not seen since 1977. Robusta coffee outperformed even this, gaining 90% over the year.
Cocoa’s 185% increase outpaced both the performance of traditional assets and cryptocurrencies. Several key factors drove this exceptional price rally:
- The most significant global supply deficit in 60 years during the 2023-24 marketing year
- Severe weather disruptions in West Africa, particularly Côte d’Ivoire, including damaging October rains and unusual dry Harmattan winds
- A 13.1% decline in world production year-over-year
- A 26.8% drop in end-of-season stocks
- Remarkably resilient consumer demand despite higher prices, demonstrating cocoa’s relatively inelastic demand characteristics
Looking ahead to 2025, several factors suggest continued price strength, including ongoing weather concerns, persistent supply issues in West Africa and sustained consumer demand.
Meanwhile, coffee prices surged to 47-year highs in 2024, driven by a confluence of supply disruptions and strong demand growth. Key factors driving the price surge included:
- Severe drought in Brazil reducing arabica production by up to 20% in the 2023-2024 season
- Heavy storms affecting Vietnam’s robusta production
- Supply chain disruptions, including port congestion, container shortages, and Red Sea shipping issues
- Growing demand, particularly from China’s expanding coffee shop culture
- Delayed implementation of EUDR regulations adding supply chain complexity
Looking ahead to 2025, several factors suggest continued price strength, including the weather damage wrought on Brazilian crops for four consecutive years and low global stocks set to persist through the first half of this year.
In contrast, grain markets faced significant pressure. Soybeans recorded losses exceeding 20%, corn declined by 15%, and wheat also posted substantial losses. The weakness in grain prices has been attributed to ample global supplies and favorable crop conditions in major producing regions. Palm oil markets were resilient, gaining approximately 20% on the back of Indonesia’s biodiesel mandate and weather-related supply concerns.
The livestock sector displayed mixed performance in 2024. Cattle futures reached new lifetime highs but experienced significant volatility, with two sharp selloff periods during spring and late summer. Hog futures were strong in the first half of the year before experiencing a substantial correction, though they recovered somewhat in the latter months, supported by record speculative positioning.
Market Outlook for 2025
Looking ahead to 2025, several key factors are expected to influence commodity markets. President Donald Trump is anticipated to introduce significant policy shifts that could impact trade relations and commodity flows. China’s planned stimulus measures could support industrial metals and energy demand, though their effectiveness remains uncertain. Global trade tensions will likely dominate the commodities landscape, with Trump’s proposed tariffs potentially reshaping international commodity trade patterns.
Conclusion
The 2024 commodity markets demonstrated that supply-side disruptions, particularly in agricultural commodities, can lead to extraordinary price movements. While traditional commodity sectors like energy and industrial metals were resilient, the year’s standout performers were primarily in the agricultural and precious metals sectors. As we move into 2025, market participants should remain vigilant to policy shifts, geopolitical developments, and weather-related supply risks that could drive similar volatility across commodity markets.
Garnet O. Powell, MBA, CFA is the President & CEO of Allvista Investment Management Inc., a firm with a dedicated team of investment professionals that manage investment portfolios on behalf of individuals, corporations, and trusts to help them reach their investment goals. He has more than 25 years of experience in the financial markets and investing. He is also the Editor-in-Chief of the Canadian Wealth Advisors Network (CWAN) magazine. He can be reached at gpowell@allvista.ca