Upon reviewing the current geopolitical landscape, it’s evident that commodity prices are likely to trend downward as traders anticipate potential economic stimulus from China this year.
However, such stimulus measures typically do not create fresh demand, especially given the increasing geopolitical uncertainties that may result in an economic slowdown. This is largely due to policy adjustments by central banks influenced by their political leaders.
Analyzing the recent price movements of various commodities, it appears that these stagnations may intensify after January 20, when President-elect Donald Trump assumes office.
Trump’s preferences are expected to shape his policies regarding interest rates and import tariffs, aimed at strengthening the US dollar, which could subsequently lead to sharp fluctuations in the prices of precious metals and energy in the near future.
If the market perceives his actions as overly aggressive and resulting in higher interest rates, it could create volatility in the commodity markets, as well as significant turbulence in global stock markets. This is particularly relevant since Trump has not reached out to some developing nations that hold potential for economic growth with the US.
Moreover, rising inflation across the globe may compel central banks to maintain elevated interest rates, adding to economic uncertainty and hampering the attraction of fresh investments.
Traders should exercise extreme caution during the first half of this year, formulating their investment strategies carefully, as these economic shifts could potentially lead to a recession if the ongoing geopolitical challenges are not effectively addressed.
Now, let’s examine the trends in the prices of precious metals and energy since the last rate cut.
Precious Metal Prices
Upon reviewing the recent price movements of gold and silver, it appears that both may continue to face bearish pressures after reaching a peak of $2828 on October 30, 2024, primarily due to heightened global uncertainty and expectations of additional rate cuts by the Federal Reserve throughout 2025.
Furthermore, silver futures have shown signs of exhaustion since peaking at $35.194 on October 30, 2024, despite the increasing demand. This suggests ongoing bearish pressure as traders await Trump’s final stance on interest rate cuts.
In the broader cryptocurrency arena, a significant sell-off occurred during the last week of 2024 as traders secured profits from an impressive performance throughout the year. However, some market caution emerged, particularly in light of expectations for a slower reduction in US interest rates in 2025.
Nonetheless, the potential for more favorable regulations under Trump has kept crypto markets optimistic, allowing for a recovery from their year-end lows.
As regulatory conditions improve, new investments may become more appealing in cryptocurrencies compared to precious metals, which previously dominated as safe-haven assets until 2024.
Thus, the favorable regulatory outlook under Trump could facilitate a shift in capital from precious metals to cryptocurrencies.
Energy Prices
Analyzing the price trends of natural gas and WTI crude oil, it’s clear that WTI Crude Oil futures are on a downward trajectory after reaching a high of $132.62 in early March 2022. The bearish trend may continue due to the formation of a significant bearish crossover, with the 50-day moving average (DMA) and 100 DMA crossing below the 200 DMA on the weekly chart, indicating a continued selling trend as WTI Crude Oil futures trade below the 50 DMA, while remaining just above the 9 DMA.
Additionally, natural gas prices are exhibiting bearish pressure after hitting a peak of $4.207 on December 30, 2024. Despite increased volatility, the overall outlook remains bearish, as any upward movements are likely to attract substantial selling interest, especially given that fossil fuels may once again become a priority for Trump in a manner similar to his previous term from 2017 to 2021.
Conclusion: It is apparent that the growing concern over a potential severe economic downturn is closely tied to President-elect Donald Trump. Should these issues not be addressed effectively by his administration in the near future, fears of an economic recession may become prevalent.
Disclaimer: This analysis is based on observations and does not provide investment advice. Readers are encouraged to make their own investment decisions regarding commodities or cryptocurrencies.
