The year 2025 is shaping up to be a mixed bag for commodity markets. While global commodity prices are largely expected to fall due to a sluggish economic outlook and a resurgent U.S. dollar, certain commodities such as gold and gas are poised for a rally. Industry experts and market participants are closely monitoring these trends, particularly in the context of China’s economic policies and global geopolitical developments.
According to Sabrin Chowdhury, the head of commodities analysis at BMI, commodities in general will face pressure across the board in 2025. The strength of the U.S. dollar is expected to cap demand for commodities priced in the greenback, making them more expensive for buyers using other currencies. This trend is likely to be exacerbated by a sluggish global economic outlook, which will dampen demand for raw materials and energy resources.
Gold prices, which notched a series of all-time highs in 2024, are expected to continue their upward trajectory in 2025. Adrian Ash, director of research at BullionVault, a gold investment services firm, attributes this optimism to investors’ pessimism about geopolitics and government debt. Gold’s role as a hedge against risk and inflation makes it an attractive asset in uncertain times. JPMorgan analysts also forecast a rise in gold prices, particularly if U.S. policies become more disruptive, leading to increased tariffs, elevated trade tensions, and higher risks to economic growth. Gold prices, which rose about 26% in 2024, are forecast to reach $3,000 per ounce in 2025.
Global natural gas prices have rallied since mid-December 2024, driven by cold weather and geopolitical tensions. Ukraine’s recent halt of Russian gas flow to several European nations on New Year’s Day has introduced greater uncertainty to the global gas markets. As long as the cutoff remains in place, gas prices are likely to remain elevated. BMI forecasts gas prices to rise by about 40% in 2025 to $3.4 per million British thermal units (MMBtu), driven by growing demand from the LNG sector and higher net pipeline exports. LNG will continue to drive new consumption, supported by rising export capacity and strong demand in Europe and Asia, according to BMI analysts.
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Crude oil prices are expected to slip in 2025, continuing the trend from 2024, which saw prices dragged down by weak Chinese demand and a supply glut. The International Energy Agency (IEA) forecasted global oil demand to grow by under a million barrels per day in 2025, a significant slowdown compared to the two million barrels per day increase in 2023. Commonwealth Bank of Australia expects Brent oil prices to fall to $70 per barrel this year, citing increased oil supply from non-OPEC+ countries that will likely outpace the rise in global oil consumption. BMI noted that the first half of 2025 is likely to see a supply glut as substantial new production from the U.S., Canada, Guyana, and Brazil comes online. If OPEC+ plans to roll back voluntary cuts materialize, the oversupply will further pressure prices.
Silver is expected to see price increases in 2025, driven by strong industrial demand. Silver is used in a variety of applications, including solar panels, automobiles, jewelry, and electronics. The demand for solar power, in particular, is expected to remain resilient, and the metal’s supply is limited.
Copper, a key material in the manufacturing of electric vehicles and power grids, may see a dent in prices in 2025. The metal reached a record high in May 2024, largely due to a squeezed market and the global energy transition. However, a potential deceleration in the energy transition, driven by policy shifts, might dampen the “green sentiment” that bolstered prices in 2024. John Gross, president of John Gross and Company, a metals management consultancy, expects copper prices to trend lower in 2025 due to a cocktail mix of high interest rates, elevated interest rates, and a stronger dollar, which will weigh on all metals markets.
Iron ore prices are forecast to drop in 2025, driven by an oversupply resulting from Chinese policies and geopolitical factors. Goldman Sachs expects prices to decline to $95 per ton in 2025, citing the expected U.S. tariffs on China, the changing nature of Chinese stimulus, and the introduction of new low-cost supply. Despite China likely importing a record amount of iron ore this year, the market is expected to move into a surplus, leading to a decline in prices.
The global commodity markets in 2025 are expected to be characterized by a mix of trends, with some commodities facing headwinds while others continue to rally. However, commodities are a solid investment option due to their inherent scarcity and long-term value as demand continues to grow. With that in context, let’s take a look at the 10 best commodity stocks to invest in according to hedge funds.
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Our Methodology
To compile our list of the 10 best commodity stocks to invest in according to hedge funds, we used commodities ETFs to compile a list of 25 companies that are involved in mining, trading or processing of commodities. We then used Insider Monkey’s Hedge Fund database to rank 10 stocks with the largest number of hedge fund holders, as of Q3 2024. The list is sorted in ascending order of hedge fund sentiment.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
10 Best Commodity Stocks to Invest in According to Hedge Funds
10. Alcoa Corporation (NYSE:AA)
Number of Hedge Fund Investors: 42
Alcoa Corporation (NYSE:AA) is a vertically integrated producer of aluminum, bauxite, and alumina. The company’s extensive portfolio includes bauxite mines, alumina refineries, aluminum smelters, and cast houses. Alcoa Corporation’s (NYSE:AA) lightweight aluminum products are critical in reducing emissions and increasing energy efficiency in transportation.
Alcoa Corporation (NYSE:AA) is dedicated to building strong relationships with its customers and suppliers. The company has expanded several important partnerships and introduced new products such as the EcoSource non-metallurgical alumina and low-carbon Equilum primary aluminum. These products help meet customer demands for sustainable and high-quality materials. By focusing on customer needs, Alcoa Corporation (NYSE:AA) aims to become the preferred supplier in the market.
Alcoa Corporation (NYSE:AA) is exploring opportunities to expand its production capacity and enter new markets. The company has restarted its Alumar smelter in Brazil, which has already achieved significant production levels. The company is also considering other capacity expansion projects and remains open to funding those that meet its return criteria and align with market demand.
Furthermore, Alcoa Corporation (NYSE:AA) is also planning to leverage its global network to respond to market changes and challenges. The company is fully prepared to redirect its Canadian production to its smelters in Europe if the U.S. government imposes tariffs on Canadian aluminum. The company is also working on improving its operations in Spain, particularly at the San Ciprian complex, through a memorandum of understanding (MOU) with key stakeholders.
9. Shell plc (NYSE:SHEL)
Number of Hedge Fund Investors: 48
Shell plc (NYSE:SHEL) is one of the world’s largest integrated energy companies, operating across the entire oil and gas value chain, including exploration, production, refining, and distribution. The company generates revenue through the extraction and sale of oil and natural gas, as well as the refining and marketing of petroleum products.
Shell plc (NYSE:SHEL) is making notable progress in its integrated gas business, particularly in liquefied natural gas (LNG). With a robust portfolio of LNG projects, the company recently started operations at Mero-3 in Brazil and continues developing LNG Canada. These projects align with the company’s strategy to leverage its leading position in the LNG market. Shell plc’s (NYSE:SHEL) focus on LNG is rooted in its view that natural gas will play a key role in the energy transition over the coming decades. Shell plc (NYSE:SHEL) is also investing selectively in high-value opportunities within its portfolio. In its upstream segment, the company is emphasizing deep-water projects in the Gulf of Mexico and Brazil, particularly in areas where it has competitive advantages.
Additionally, Shell plc (NYSE:SHEL) is exploring new opportunities in basins such as Namibia, where it has been active in exploration while closely monitoring developments by other players in the region. Although cautious about potential challenges in Namibia, the company is committed to pursuing commercially viable projects that meet its rigorous investment standards.
