Trump hits commodities hard, Citigroup: sell oil, buy gold at the bottom, metals look to China

Currently, the "Trump trade" dominates the market. The news of Trump's victory has driven up the US dollar, US stocks, and cryptocurrencies, but at the same time, the market has begun to price in the risks of tariff policies, leading to a general decline of 1-5% in crude oil, gold, and copper.

Overnight, the "leader" among commodities, gold fell by 3%, while silver and London copper both dropped over 4%. What is the future trend of commodities?

Citigroup's latest research report predicts that Trump's return will hit oil prices, with Brent crude expected to fall back to $60 per barrel by 2025. In the short term, gold may perform weakly due to the strength of US stocks and AI trading, but the driving factors for a gold bull market still exist. It is recommended to buy on dips below $2,700 per ounce, with a 6-month target price still at $3,000.

For other metals, Citigroup believes the mid-term outlook for base metals is relatively uncertain, and future trends may depend more on developments in China and trade situations, thus holding a neutral stance on base metals.

Short-term weakness in precious metals does not affect long-term trends; buy gold on dips

Citigroup pointed out in the report that historically, gold usually performs poorly after US presidential elections. For example, after Trump took office in 2016, gold fell by 8% within a month. However, this trend provides investors with opportunities to buy on dips, and it is still believed that gold prices will rise to $3,000 per ounce within 6 months.

The structural driving factors for a gold bull market still exist, including the high interest rate environment in the US, a continuously deteriorating labor market, and the sustained growth in global gold ETF demand. Additionally, the ongoing expansion of global debt levels and the process of de-dollarization also support gold. Citigroup believes that central banks around the world may continue to purchase gold in large quantities.

From a trade perspective, the tariff policies proposed by Trump may suppress US economic growth, similar to 2019, leading to increased allocation to gold assets and potentially driving up gold prices. Citigroup notes that considering silver's high positive beta coefficient to global economic growth, silver's performance may be influenced to some extent by trade situations.

Trump's return will hit oil prices

Citigroup advises oil producers to reduce exposure to Middle Eastern risks in the next month or two, expecting that oil prices may come under pressure after Trump takes office, with Brent crude prices expected to average $60 per barrel in 2025.

Before Trump's return, the situation in the Middle East may further escalate, leading to sharp fluctuations in oil prices. With Trump back in the White House and the Republican Party winning a majority in the Senate, Brent crude prices have already begun to decline. Citigroup believes that Trump's new term may have a bearish impact on the oil market, and this political change may continue to pressure oil prices into 2025, although the risks of politics and sanctions may still support oil prices The impact of Trump's tariff policy will have a negative effect on the global economy. Citigroup's simulation data shows that a 10% tariff imposed by the U.S. on other countries will lead to a reduction in global GDP by 0.4% to even 0.6%. This further weakens the growth of global oil demand, especially for diesel. Trump may also influence OPEC+'s production decisions, further affecting the oil market trends.

Tariff Policy - A Major "Headwind Factor" for Base Metals, Mid-term Outlook Focused on China

Citigroup points out that after Trump's election and the Republican "red wave," the market immediately priced in the risks of tariff policies, leading to a sharp decline in base metal prices. Therefore, the base metal market is currently in a "wait-and-see mode."

The bank believes that the mid-term trend of base metals will depend on how China and trade relations develop. Its baseline scenario predicts that copper prices will rise to $11,000 per ton in the second half of 2025, and aluminum prices will reach $2,900 per ton in the second half of 2025. The reasons are that the Federal Reserve's interest rate cuts, China's easing policies, and falling oil prices are expected to support the recovery of the global manufacturing cycle. Additionally, the growth in decarbonization-related demand will also support metal prices