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After a robust first half, what's next for H2?

Key points in this update:

• The Bloomberg Commodity Total Return Index rose 5.5% in the first half, with the bulk of gains coming from just four contracts: gold, silver, copper, and live cattle. Note, platinum which surged almost 50% sits outside the BCOM index.
• In our recently published Q3 macro outlook, we called for less chaos and, ideally, a touch more clarity in the months ahead, with focus on the economic tariff fallout, the US dollar, and geopolitical developments.
• The ongoing forces of deglobalisation, decarbonisation, defence spending, de-dollarisation, demographics, urbanisation, and climate change continue to lay the groundwork for a potential commodity bull market.
• With most of the mentioned “Ds” being resource-intensive, we remain broadly constructive in the second half on precious and industrial metals, as well as natural gas, while crude oil may face headwinds amid rising output and economic growth concerns.

The commodity sector closed the first half of 2025 on firmer ground, with the Bloomberg Commodity Total Return Index rising 5.5%. This gain follows a volatile stretch that saw the worst quarter in two years (-2.7% in Q2) being more than offset by the best in four years (+8.9% in Q1).

At its core, commodity pricing hinges on the balance between supply and demand—both actual and perceived. Yet within that framework, several interconnected factors shape market direction: speculative flows that can amplify trends, interest rates that influence the cost of carry for non-yielding assets, and the inverse correlation between commodities and the dollar, a major driver in the first half as the Greenback lost around 9% against its major peers. Liquidity and sentiment also play key roles, with thin markets or abrupt sentiment shifts often sparking outsized price moves—regardless of underlying fundamentals. Finally geopolitical developments from wars to sanctions and trade disputes may create periods of supply risk premiums.

In H1, the bulk of the BCOMTR index’s gains came from just four contracts: gold (+24.4%), silver (+22.9%), copper (+24.9%), and live cattle (+18.1%). At the annual rebalancing of the index in early January, these markets represented 27.8% of the index, and their strong performance has pushed that share close to one-third, underscoring their outsized influence on index returns heading into the second half.

Interestingly, platinum, which surged by 48%, thereby topping the performance table by a safe distance, sits outside the index. While eligible for index inclusion, it has failed in recent years to meet the minimum thresholds, as its Commodity Index Percentage (CIP)—a blend of liquidity and production metrics—relative to gold and silver has left its inclusion unlikely for now.

At the other end of the spectrum, the grain sector dragged on performance, led by corn and wheat, weighed down by ample global supplies and signs of another bumper harvest across the northern hemisphere, following a strong southern season led by South America. Soybeans held up amid strong demand for soybean oil towards biofuels, a situation that together with a possible trade agreement with China bodes well for demand into the second half.

Cocoa and coffee ease after recent surge

Cocoa and coffee, two of the recent highflyers, suffered end-of-quarter setbacks amid improved growing conditions in Brazil for Arabica beans and, in the case of cocoa, due to weaker demand driven by elevated prices. While the outlook for cocoa has improved, partly driven by improved production forecasts, uncertainty persists owing to structural challenges and financing constraints in the two largest producers—Ivory Coast and Ghana. Coffee consumption, by contrast, has remained resilient despite higher prices, with the beverage still viewed as an affordable luxury. However, if prices stay elevated, we may eventually see a shift from out-of-home consumption of premium Arabica to lower-grade Robusta consumed at home.

Ample crude supply caps upside potential in H2

The energy sector ended the first half near flat following a volatile June. Tensions in the Middle East triggered a sharp rally, which quickly reversed after a U.S.-brokered ceasefire between Israel and Iran eased fears of supply disruptions through the Strait of Hormuz—arguably the world’s most strategically important oil transit chokepoint. Brent and WTI both fell around 4% during the period, as focus returned to the potential drag on global growth from Trump’s tariffs and the risk of an oversupplied market heading into autumn. OPEC8+ continues to ramp up production in an effort to punish overproducing quota cheaters, and to reclaim market share from higher-cost producers which may eventually have to dial down production amid lower price expectations.

The latest Energy Survey from the Dallas Fed highlighted the risks to US production from falling prices. Asked how they would respond to a WTI price at USD 60 per barrel over the next 12 months, 85 exploration and production firms 60% answered it would mean a small reduction, and 10% a significant reduction. Should the price stay at USD 50 over the next 12 months, that combined figure jumps to near 90%, highlighting a potential floor in global oil prices below which supply will suffer and the market will balance.

Natural gas, an increasingly important energy source in the global transition and rapidly growing power demand, managed a modest 2% gain during the first half. While robust production growth and mild weather curbed near-term consumption, the long-term outlook remains constructive. Expectations for rising demand—driven by electrification, data center expansion, and its role as a flexible backup to intermittent renewables—continue to support the market narrative, even as short-term fundamentals remain soft.

In our recently published Q3 Macro Outlook, we called for less chaos and, ideally, a touch more clarity in the months ahead. Whether that materializes will depend heavily on the outcome of ongoing tariff negotiations. Current tariff levels—averaging somewhere between 12% and 18%—continue to act as a drag on both U.S. and global growth. That said, we expect the dollar to remain under pressure, not least because a weaker greenback aligns with the preferences of the current U.S. administration.

As my colleague John J. Hardy noted in the outlook:

“Trump 2.0 policy is anti-globalist—what economist Russell Napier calls ‘national capitalism,’ and others might label ‘reverse mercantilism.’ The U.S. is attempting to unravel the global economic order it helped build post-WWII—an order that fueled global growth and kept prices low for U.S. consumers. A strong dollar was central to that system, as export-driven economies suppressed their currencies. In the process, U.S. manufacturing was hollowed out, leaving the nation exposed to supply chain shocks—a vulnerability now seen as a national security issue. Despite Trump’s transactional approach and protectionist stance, the U.S. dollar will remain dominant—but less so than before.” 

Seven forces shaping the next commodity cycle

From a commodity perspective, we see opportunity amid these structural shifts. The ongoing forces of deglobalisation, decarbonisation, defence spending, de-dollarisation, demographics, urbanisation, and climate change continue to lay the groundwork for a potential commodity bull market. Arguably, that cycle already began between 2020 and 2022, catalyzed by post-Covid stimulus and the war in Ukraine. Commodities can trade sideways for years when supply and demand are balanced—but when a macro theme takes hold, it can spark so-called super-cycles. The last major example was China’s rapid industrialisation, which from 2000 to 2008 drove the BCOMTR index up 250% as supply of many key commodities consistently lagged demand.

Looking ahead, with most of the mentioned “Ds” being resource-intensive, we remain broadly constructive on precious and industrial metals, as well as natural gas. Crude oil, however, may face medium-term headwinds as rising OPEC+ output and lower prices have yet to weigh on high-cost producers, while the broader economic implications of Trump-era trade and foreign policy become clearer.

Precious metals: More gains ahead following robust H1 performance

As mentioned, gold up until recently led the charge for months, with silver and platinum recently joining the rally amid a potent mix of rising fiscal debt concerns, tariff-driven supply shocks, a softening labour market, and continued US dollar weakness—developments that may eventually prompt a dovish, and potentially stronger-than-expected, policy shift by the Federal Reserve. Adding to this is the risk of higher inflation and central banks extending their gold-buying spree into a fourth consecutive year; the groundwork for a push toward USD 4,000 within the next twelve months is, in our opinion, within reach.

Silver’s recent break above USD 35 may signal higher prices ahead, also on a relative basis to gold where accelerated central bank demand for gold since 2022 has left silver trailing on a relative basis as seen through the gold-silver ratio trading closer to 95 than its five-year average near 80. A gold rally to USD 4,000 in the next twelve months coinciding with a XAUXAG move to 80 would send silver back to its 2011 record high at USD 50.

Copper supported by energy transition and short-term supply chain dislocations.

The current copper rally—driven by a tangible supply squeeze as inventories shift toward the U.S. ahead of expected tariff announcements—highlights how swiftly fundamentals can reassert themselves in a tight market. Yet beyond this near-term disruption, the global energy transition is laying the groundwork for sustained, structural demand growth.

With mining and refining capacity constrained by years of underinvestment, the risk is clear: supply will struggle to keep pace. The result? A higher baseline for prices and increased volatility. Copper is uniquely positioned at the intersection of short-term bullish momentum and long-term megatrends, steadily reinforcing its reputation as “the metal of the future.”

While China remains well ahead in electrifying its economy, the U.S. is rapidly awakening to the scale of future power needs—from AI-driven data centers and widespread EV adoption to industrial reshoring and soaring cooling demand in a warming climate. Meeting these challenges will require significant grid expansion—and with it, copper, the unrivaled conductor of electricity, the medium- to long-term demand and price outlook remain supportive.

Related articles/content

27 June 2025: Commodities weekly Broad reversal led by energy copper and platinum stand tall 25 June 2025: Copper extends rally on tariff-related supply squeeze 24 June 2025: Oil tumbles as Hormuz risk premium evaporates following symbolic retaliation and ceasefire deal 23 June 2025: Oil market on edge as Hormuz risk premium builds 20 June 2025: Commodities weekly Strength in energy and grains offsets pause in precious metals 19 June 2025: Wheat rise on short covering and weather woes but fundamentals still lacking 18 June 2025: Commodities strengthen into midyear as demand for hard assets heat up 16 June 2025: COT Report: Speculators sell dollars, buy crude ahead of Middle East escalation 13 June 2025: Commodities weekly Geopolitics lift crude and gold 12 June 2025: Brent crude briefly breaches 70 amid Iran attack threats 10 June 2025: COT Report: Metals, energy demand offset by broad Ag selling 6 June 2025: Commodities weekly Gold stalls spotlight shifts to cheaper silver and platinum 4 June 2025: Crude oil holds firm despite mounting supply glut fears 3 June 2025: Gold and silver break key levels as copper eyes tariff decision 2 June 2025: COT Report: Speculators sold crude ahead of OPEC hike 28 May 2025: Breakout or breakdown Gold silver and platinum face pivotal resistance zones 26 May 2025: COT Report: Hedge funds return to gold; elevated grains short 23 May 2025: Commodities weekly Diverging supply trends boost platinum weigh on crude 21 May 2025: Israel attack risks add modest risk premium to crude prices 20 May 2025: As gold pauses is platinum ready to shine for investors 19 May 2025: COT Report: Speculators show measured reaction to trade truce 16 May 2025: Commodities Weekly - Gold retreats Procyclicals rise amid trade truce optimism 14 May 2025: Crude stays range-bound despite latest tariff-truce bounce 13 May 2025: Gold holds steady as tariff truce sparks silver rebound 12 May 2025: COT Report: Broad risk reduction seen ahead of easing trade tensions 9 May 2025: Commodities weekly Sentiment improves as trade tensions cool before talks 8 May 2025: Copper market navigates tariff uncertainty amid tight global supply 7 May 2025: Agriculture markets diverge as trade war weather and speculators reshape landscape 6 May 2025: Crude climbs as market digests OPEC hike and shale slowdown risks 6 May 2025: Gold rises as Chinese demand rebounds post-holiday 5 May 2025: COT Report: Dollar-selling persists; Crude length trimmed ahead of OPEC output hike 1 May 2025: Gold corrects sharply from record highs as Chinese demand pauses Podcasts that include commodities focus: 2 July 2025: Three big questions in the week ahead 24 June 2025: Crude oil and USDJPY whiplash. Tesla fans ignore shaky debut 23 June 2025: Market quickly recovering from Operation Midnight Hammer 20 June 2025: Yep: NOK, wheat and Tesla in the same podcast. 13 June 2025: Geopolitics derails risk sentiment, but for how long? 6 June 2025: Silver rips as Musk-Trump bromance trips 28 May 2025: Nvidia to determine whether US stocks can achieve new highs 12 May 2025: As good as it gets on the trade news front 6 May 2025: Bears hang in at key levels as Palantir rides the retail whirlwind

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Key points in this update:

• The commodities sector reversed sharply lower this past week, primarily driven by a collapsing risk premium amid a Middle East truce, and crop friendly weather and harvest pressure weighing on key crops
• Raised risk appetite on trade deal hopes and ceasefire sapped demand for gold leading to profit taking in silver and not least platinum, the star performer in 2025
• Continued transfers of copper to the U.S. ahead of tariffs has lifted COMEX stocks above those held at LME and Shanghai - a first, highlighting an increasingly tight market outside the U.S.

Following a strong June performance, the Bloomberg Commodity Index reversed sharply lower this past week, dropping around 4%. The pullback was primarily driven by renewed weakness in the energy sector, as the Middle East risk premium evaporated faster than it rose following a US-brokered ceasefire between Israel and Iran. Weather also played a role, with crop-supportive conditions weighing on the grains sector.

Partially offsetting these losses was a solid performance across the industrial metals space, where tightening supply conditions—especially in copper—triggered a fresh squeeze. The red metal extended its already impressive 2025 rally amid robust physical demand and continued tightness in visible inventories, particularly in China and Europe.

More broadly, the week was marked by a notable improvement in overall market sentiment. The ceasefire in the Middle East reduced geopolitical anxiety, while speculation mounted that President Trump might soon announce a preferred candidate to replace Fed Chair Jerome Powell, whom he has repeatedly criticized for being too cautious on rate cuts. The chatter contributed to a softer dollar and falling Treasury yields, helping to reprice expectations toward more aggressive monetary easing in the second half of the year.

Risk assets responded positively: equity markets surged on growing optimism that the U.S. is inching closer to trade deals with China and other major partners, reviving the "risk-on" narrative. Gold, by contrast, continued to struggle. The yellow metal recorded its second consecutive weekly loss, as its traditional safe-haven appeal dimmed in the face of rising risk appetite and declining real yields. Despite a supportive macro backdrop for much of the year, gold has looked increasingly fatigued in recent weeks, failing to capitalize on news that would typically offer support. The protracted consolidation phase has now raised the risk of a deeper correction.

Silver and platinum also succumbed to profit-taking. Platinum, in particular, gave back some gains after a meteoric rally to a 14-year high, driven by tightening market conditions amid rising investor interest. While the longer-term outlook remains constructive, last week marked a natural pause in the rally, as traders locked in profits following an exceptional run.

Crude oil tumbles as geopolitical risk premium collapses

For a second consecutive week, the crude oil market dominated headlines, driven by heightened geopolitical tensions in the Middle East. A brief but sharp surge in the geopolitical risk premium—at one point adding nearly $15 to the price of a barrel—followed the outbreak of hostilities between Israel and Iran. Brent crude, the global benchmark, briefly topped $80 per barrel on Monday after President Trump backed a coordinated Israeli strike on Iran’s nuclear facilities.

However, the rally proved short-lived. Instead of targeting oil infrastructure or the important shipping lanes around the Strait of Hormuz, Iran responded by targeting an empty U.S. military installation in Qatar. An attack that was flagged well in advance to both the U.S. and Qatar, and which ultimately failed. The market interpreted the action as a deliberate move to de-escalate rather than escalate tensions, triggering the sharpest two-day sell-off in crude since 2022.

What followed was a U.S.-brokered ceasefire, which, while fragile, has so far held. With geopolitical fears fading, traders have refocused on market fundamentals, which continue to point to ample supply into the second half of the year. Production increases from a group of eight OPEC+ members are adding to the bearish narrative. The alliance is expected to agree at its 6 July meeting to raise output by another 411,000 barrels per day from August, bringing total announced increases in 2025 close to 1.8 million barrels per day.

This supply expansion comes at a time when the global macroeconomic outlook remains challenged—not least due to the ongoing fallout from Trump’s aggressive trade stance, which continues to dampen demand prospects and weigh on broader sentiment. That may, however, change—read: improve—next week, after Trump announced the signing of a deal with China on Wednesday and mentioned a potential upcoming deal with India and other major trading partners.

Copper leads industrial metal rally as supply squeeze deepens

The mentioned energy slump this week, allowed industrial metals to emerge as the standout performers in the commodity complex. The Bloomberg Commodity Industrial Metals Index rose 2.8%, led by copper, which has extended its stellar year-to-date rally to around 25% — cementing its place among the top-performing major commodities of 2025.

On the London Metal Exchange (LME), three-month copper futures are trading near multi-month highs between $9,800 and $10,000 per metric ton. In New York, COMEX High Grade copper is back above $5 per pound, rebounding after briefly hitting a record $5.37 in March amid a buying frenzy ahead of widely anticipated U.S. import tariffs.

The latest leg higher is being driven by a deepening supply squeeze in London. LME inventories have dropped sharply in recent weeks, with readily available stockpiles depleted by a surge in shipments to the U.S., where buyers rushed to secure material ahead of pending tariff measures. This drawdown has triggered a steep backwardation, with near-term contracts trading at a premium — a classic signal of tightening physical supply.

While the immediate rally reflects logistical disruptions and inventory dynamics, the broader outlook for copper remains firmly bullish. As the global economy accelerates its shift toward electrification, copper’s role as the most efficient industrial conductor is becoming increasingly vital. Demand tailwinds are emerging from AI-driven power demand, hyperscale data centers, EV rollouts, charging infrastructure, industrial reshoring in the U.S., and rising demand for cooling.

Copper stocks monitored by the three major futures exchanges have slumped to a 16-month low of 361 kt. Notably, COMEX has seen inventories rise for a 15th consecutive week to 188.6 kt, now holding more copper than the LME (91.3 kt) and SHFE (81.5 kt) combined — a first. Until the U.S. tariff announcement is made, the elevated price premium in New York over London may continue to see copper shipped to U.S. which accounts for less than 8% of global demand, exacerbating tightness in other regions, potentially keeping copper prices elevated despite economic headwinds curbing demand from traditional sources of demand towards construction.

Top-performing platinum surges to a 14-year high

Platinum surged to a fresh 14-year high above USD 1,400 per ounce, before attracting heavy profit taking, with gold trading lower for a second week weighing on risk sentiment across investment metals. Platinum, nevertheless continues to cement its status as this year’s top-performing commodity with a gain of almost 50%. The rally has been driven by a deepening structural deficit, accelerating drawdowns in above-ground inventories, and a recent wave of physical demand from Chinese investors and jewellery consumers shifting away from 'expensive' gold.

The white metal—used in catalytic converters, industrial applications, jewellery, and on/off investment demand—had been stuck in a decade-long sideways trend, averaging around USD 950 an ounce since 2015. Over the same period, gold went from trading at a discount to more than triple in value, leaving platinum increasingly undervalued, relatively, and overlooked by investors. However, gold’s continued ascent eventually helped revive interest in platinum, particularly in China, where a growing number of consumers have turned to platinum coins, bars, and jewellery as a more affordable alternative.

The breakout began in earnest in late May during this year’s Platinum Week in London, as sentiment among market participants—ranging from analysts and institutional investors to end-users—shifted decisively. The bullish tone was reinforced by a key update from the World Platinum Investment Council (WPIC), which highlighted a worsening supply-demand imbalance.

Following a record deficit of 992,000 ounces in 2024, WPIC now forecasts a 966,000-ounce shortfall in 2025—marking the third consecutive annual deficit and underscoring the continued depletion of above-ground inventories, which are now estimated to cover just three months of demand. The Council warns these stock levels are approaching "unsustainably low" territory, raising concerns over supply security going forward. Traders jumped into the trade, and once the 17-year-old downtrend from 2008 got broken, the metal was no longer overlooked.

With sentiment flipping, inventories tightening, and demand rising—particularly in Asia—platinum appears to be shedding its long-standing underdog status, potentially paving the way for further gains in the second half of the year, especially if gold springs back to life following a period of consolidation which so far has lasted around ten weeks. While speculators have helped fuel the rally, buying 350k oz since 20 May, ETF investors have remained largely on the sidelines. Apart from a brief pickup in interest earlier this month, total holdings are flat on the year and up just 35,000 oz since the mentioned date.

Grain markets retreat on crop optimism and harvest pressure

Weather developments remain the key source of directional inspiration for grains traders, with the important growing season now well underway across the Northern Hemisphere. Following an early June scare, favourable weather in the US and elsewhere—combined with expectations of record Brazilian crops—has since been weighing on prices, driving the Bloomberg Commodity Grains Index towards a weekly loss of 5%. Corn and soybeans are lingering near multi-month lows, while ongoing winter wheat harvest pressure has pushed Kansas and Chicago wheat contracts down by more than 7% this week.

After a hot and dry period earlier this season, improved weather conditions across Europe, Russia, and now also the US have lifted prospects for another bumper wheat crop. In response, the International Grains Council (IGC) has raised its 2025–26 world wheat crop outlook by 2 million tonnes to 808 million. Focus now turns to Monday’s Crop Progress and quarterly Stocks Report from the US Department of Agriculture (USDA), which could provide further direction for price action heading into the new trading week.

Related articles/content

25 June 2025: Copper extends rally on tariff-related supply squeeze 24 June 2025: Oil tumbles as Hormuz risk premium evaporates following symbolic retaliation and ceasefire deal 23 June 2025: Oil market on edge as Hormuz risk premium builds 20 June 2025: Commodities weekly Strength in energy and grains offsets pause in precious metals 19 June 2025: Wheat rise on short covering and weather woes but fundamentals still lacking 18 June 2025: Commodities strengthen into midyear as demand for hard assets heat up 16 June 2025: COT Report: Speculators sell dollars, buy crude ahead of Middle East escalation 13 June 2025: Commodities weekly Geopolitics lift crude and gold 12 June 2025: Brent crude briefly breaches 70 amid Iran attack threats 10 June 2025: COT Report: Metals, energy demand offset by broad Ag selling 6 June 2025: Commodities weekly Gold stalls spotlight shifts to cheaper silver and platinum 4 June 2025: Crude oil holds firm despite mounting supply glut fears 3 June 2025: Gold and silver break key levels as copper eyes tariff decision 2 June 2025: COT Report: Speculators sold crude ahead of OPEC hike 28 May 2025: Breakout or breakdown Gold silver and platinum face pivotal resistance zones 26 May 2025: COT Report: Hedge funds return to gold; elevated grains short 23 May 2025: Commodities weekly Diverging supply trends boost platinum weigh on crude 21 May 2025: Israel attack risks add modest risk premium to crude prices 20 May 2025: As gold pauses is platinum ready to shine for investors 19 May 2025: COT Report: Speculators show measured reaction to trade truce 16 May 2025: Commodities Weekly - Gold retreats Procyclicals rise amid trade truce optimism 14 May 2025: Crude stays range-bound despite latest tariff-truce bounce 13 May 2025: Gold holds steady as tariff truce sparks silver rebound 12 May 2025: COT Report: Broad risk reduction seen ahead of easing trade tensions 9 May 2025: Commodities weekly Sentiment improves as trade tensions cool before talks 8 May 2025: Copper market navigates tariff uncertainty amid tight global supply 7 May 2025: Agriculture markets diverge as trade war weather and speculators reshape landscape 6 May 2025: Crude climbs as market digests OPEC hike and shale slowdown risks 6 May 2025: Gold rises as Chinese demand rebounds post-holiday 5 May 2025: COT Report: Dollar-selling persists; Crude length trimmed ahead of OPEC output hike 1 May 2025: Gold corrects sharply from record highs as Chinese demand pauses Podcasts that include commodities focus: 24 June 2025: Crude oil and USDJPY whiplash. Tesla fans ignore shaky debut 23 June 2025: Market quickly recovering from Operation Midnight Hammer 20 June 2025: Yep: NOK, wheat and Tesla in the same podcast. 13 June 2025: Geopolitics derails risk sentiment, but for how long? 6 June 2025: Silver rips as Musk-Trump bromance trips 28 May 2025: Nvidia to determine whether US stocks can achieve new highs 12 May 2025: As good as it gets on the trade news front 6 May 2025: Bears hang in at key levels as Palantir rides the retail whirlwind

More from the author
Ole S Hansen's articles on Saxo Follow and interact with me on Twitter and BlueSky social media platforms