Commodity Wrap - Oil, Gold, Silver, Corn (18.03.2025)

Oil:

• Increased tension in the Middle East following US airstrikes on Houthi positions in Yemen led to price increases at the beginning of the new week

• Donald Trump indicated that Iran will be held responsible for any attacks by the Houthis

• Israel is conducting strikes in the Gaza Strip following the collapse of peace talks

• A conversation between Trump and Putin regarding a ceasefire in Ukraine is scheduled for Tuesday, March 18

• OPEC+ is still expected to increase production from April 1, which may lead to oversupply later this year. Monthly production is set to increase by 138,000 barrels per day

• Goldman Sachs has lowered its oil price forecasts for 2025, indicating that Brent crude will be $71 USD and WTI $67 USD per barrel. The previous WTI forecast was $72 USD per barrel

• Goldman Sachs indicates that oil demand this year will grow by only 0.9 million barrels per day

• Macquarie Group projects Brent prices at $68 USD per barrel on average in 2025. The company indicates that price drops below $60 USD are possible but will be short-lived. Drops to around $40 USD per barrel are not expected

• China is limiting purchases of Russian oil due to recent US sanctions against Russia, which primarily target shadow fleets and some Russian oil companies

• Donald Trump threatened Russia that sanctions could be tightened if they show no willingness to establish a ceasefire with Ukraine

• The market still hopes for a ceasefire in Ukraine, which limits potential further increases in the oil market

Oil and petroleum product inventories in the US have approached last year's levels, which may indicate limited short-term demand or excessive supply. Source: Bloomberg Finance LP, XTB

Oil prices are rebounding, mainly due to geopolitical reasons. However, it's worth noting that the crack spread as a leading indicator has remained at an elevated level since almost the beginning of the year, suggesting higher prices in the near future. Source: Bloomberg Finance LP, XTB

WTI crude breaks through the $68 USD per barrel level and is approaching a test of the 25-session average, which has remained above the current price since the end of January. The upper boundary of the downward trend channel is slightly above. Source: xStation5

Gold:

• Gold continues to rise and is one of the best-performing assets this year. Since the beginning of this year, gold has gained over 15%

• Gold not only breaks through the $3,000 USD level but also reaches $3,020 USD per ounce

• Higher returns in the commodity market this year are only seen in silver and coffee

• According to Heraeus, a company dealing with precious metals, demand from central banks in January fell by 60% year-over-year to 18.5 million tons, which was the lowest monthly purchase since January 2021

• Macquarie Group indicates that it sees chances for gold prices to reach $3,500 USD per ounce in Q2 this year. Marcus Garvey, on the other hand, points to an average price in the first three quarters at $3,150 USD per ounce. Goldman Sachs sees a price of $3,100 USD by the end of the year

• ANZ sees a price of $3,100 USD within 3 months and $3,200 within 6 months

• Bolivia intends to increase gold purchases for its reserves this year

• Bank of America indicates that the largest central bank buyer last year, the National Bank of Poland, may significantly reduce purchases this year as it approaches a 20% gold share in its reserves. BofA indicates that NBP may buy another 50 tons of gold this year. In January, NBP reportedly purchased 3.1 tons of gold

Gold is the third-best performing commodity this year. Source: Bloomberg Finance LP, XTB

One of the growth factors in the gold market is increased activity of ETF funds, which, with small breaks, have been buying gold this year. Source: Bloomberg Finance LP

Silver:

• The increase in silver prices this year is higher than the increase in gold prices

• The Silver Institute indicates another year of significant deficit in the silver market, although price increases will cause supply growth. The deficit is expected to be visible for the 5th consecutive year

• Demand in 2025 is expected to reach 1.2 billion ounces, similar to 2024. Growth is expected to come from industrial and investment sides, but will be lower from jewelry and silverware production

• Silver supply is expected to increase by 3% to 1.05 billion ounces and will be the highest in 11 years. This is expected to be related to a 2% increase in mine production to 844 million ounces and a 5% increase in silver recovery to 200 million ounces

• Silver is currently trading above $34 USD per ounce and is at its highest since October 2024. However, looking at weekly candles, the price closed last week at its highest since 2012

• We are again observing a significant increase in net positions on silver, although it is still far from levels of excessive overbought

• ANZ indicates that the gold-to-silver ratio at 90 is near historical peaks. ANZ forecasts a price of $34-36 USD per ounce in the short term

• Further increase in silver prices is expected if tariffs on Canada and Mexico remain at 25%. The US imports as much as 70% of its silver from these two countries. We continue to observe a significant increase in silver inventories on COMEX

The number of long positions is growing and the number of short positions is decreasing. Theoretically, we can observe the first signs of overbought conditions, although it is still far from extremely high numbers of net positions or extremely high long positions themselves. Source: Bloomberg Finance LP, XTB

The gold-to-silver ratio is at about 90, remaining close to historical peaks (excluding 2020). This means that there is still considerable potential for silver prices. Assuming a price of $3,000 USD for gold and a decrease in the ratio to 80 (10-year moving average), the silver price should be around $37.5 USD per ounce. Source: Bloomberg Finance LP, XTB

In terms of price change, silver is performing the best in 5 years, but it's evident that the price can grow by even 50-60% during a year. Source: Bloomberg Finance LP, XTB

Corn:

• Weather prospects in Brazil are improving from currently very dry conditions. Increased precipitation is expected from the end of March through April, which will be crucial for corn crops

• The weather situation in the US from the perspective of corn and wheat looks bad. Soil moisture remains low, which is a key factor from the perspective of approaching sowings

• Corn exports from the US are proceeding at a faster pace than in the last 5 years

• Trade tariffs on Mexico and Canada may lead to retaliatory actions aimed at the grain market. Mexico is the largest recipient of American corn

• At the end of March, we will learn about another report on sowing prospects, which may be key from the perspective of corn and soybeans

Corn exports in the US are proceeding at the strongest pace in 5 years. Source: Bloomberg Finance LP

The term structure of corn has flattened significantly, which may indicate lower short-term demand or expectations of greater supply in the near future. Source: Bloomberg Finance LP

The reduction of long positions in the corn market continues. On the other hand, the number of short positions is not increasing, as was the case in 2023, for example. Source: Bloomberg Finance LP, XTB

Globally, we observe very low ending stocks of corn. On the other hand, ending stocks are still about 2 times higher than 10 years ago.