The World Bank has predicted a significant 12% drop in global commodity prices in 2025. This decline is expected due to slower economic growth, new tariffs and disruptions in global trade. While most commodities, especially energy are likely to see lower prices gold is expected to shine reaching record highs above $3000 per ounce as a safe haven investment.
Why Are Commodity Prices Falling?
Commodities are raw materials like oil, gas, metals and agricultural products that are traded globally. Their prices depend on supply, demand and global economic conditions. According to the World Bank several factors are pushing commodity prices down in 2025:
- Slowing Economic Growth: Many countries including major economies like China and the United States are expected to grow more slowly in 2025. When economies slow down industries use fewer raw materials like oil, coal and metals. This reduces demand and lowers prices.
- Tariffs and Trade Disruptions: Governments are imposing tariffs which are taxes on imported goods, to protect local industries. These tariffs can disrupt global trade making it harder or more expensive to move commodities across borders. For example if a country puts a high tariff on imported steel demand for that steel may drop pushing prices down.
- Oversupply in Some Markets: In some cases theres simply too much of a commodity available. For instance advances in technology and production have increased the supply of oil and gas which can lead to lower prices if demand doesn’t keep up.
These factors combined are expected to create a challenging environment for commodity markets in 2025 leading to the predicted 12% price drop.
Energy Prices: A Big Decline
Energy commodities such as crude oil and natural gas are expected to see some of the biggest price drops. Brent crude oil a global benchmark is forecasted to fall significantly. This is mainly because of weaker demand from slower growing economies and an increase in oil production from countries outside OPEC like the United States.
Lower energy prices can have mixed effects. On one hand cheaper oil means lower costs for transportation and manufacturing, which could reduce prices for everyday goods like fuel and groceries. For consumers this might mean saving money at the gas pump. However for countries and companies that rely on exporting oil lower prices could hurt their economies leading to job losses or reduced government revenue.
Natural gas prices are also expected to decline especially in regions with high production like North America. However disruptions in supply chains or unexpected weather events like cold winters could still cause temporary price spikes.
Gold: The Bright Spot
While most commodities are expected to struggle gold is set to shine. The World Bank predicts that gold prices will climb above $3000 per ounce a record high. Why is gold different? Gold is considered a “safe haven” asset meaning investors turn to it during times of uncertainty.
Several factors are driving gold’s rise:
- Economic Uncertainty: With slower growth and trade tensions many investors are nervous about the future. They buy gold to protect their wealth as it tends to hold its value even when other investments like stocks falter.
- Geopolitical Tensions: Ongoing conflicts and political instability in some regions make gold more attractive. When the world feels unpredictable gold becomes a reliable store of value.
- Weakening Currencies: Some countries currencies may lose value due to economic challenges. Gold, which is priced in U.S. dollars becomes more expensive as currencies weaken pushing its price higher.
For investors gold’s rise could be an opportunity but it also signals caution. High gold prices often reflect broader economic worries so it’s worth keeping an eye on the bigger picture.
What About Other Commodities?
Other commodities like metals (copper, aluminum) and agricultural products (wheat, corn) are also likely to see price declines. For metals slower industrial activity in countries like China a major consumer is reducing demand. Similarly agricultural prices may fall due to better harvests or reduced demand from slower economies.
However some commodities could see price spikes if unexpected events occur. For example a drought could hurt crop production driving up food prices. Similarly political conflicts or sanctions could disrupt metal or energy supplies causing temporary shortages.
What Does This Mean for You?
The drop in commodity prices will have both positive and negative effects depending on where you live and what you do:
- Consumers: Lower energy and food prices could ease the cost of living. Filling up your car or buying groceries might become cheaper leaving you with more money for other expenses.
- Businesses: Companies that rely on raw materials like manufacturers or airlines could benefit from lower costs. However businesses in commodity producing industries like oil drilling or mining might face challenges.
- Investors: If you invest in commodities or related industries 2025 could be a tricky year. While gold looks promising other commodities may not offer strong returns. Diversifying your investments might be a smart move.
- Developing Countries: Many developing nations depend on exporting commodities like oil metals or crops. Lower prices could hurt their economies leading to budget cuts or slower growth.
Looking Ahead
The World Bank’s outlook for 2025 paints a complex picture for commodity markets. While the 12% price drop reflects challenges like slower growth and trade disruptions gold’s rise highlights ongoing uncertainties. For consumers, businesses and investors these changes will bring both opportunities and risks.
To navigate this environment stay informed about global trends and be ready for surprises. Weather events political decisions or shifts in supply and demand could all shake up commodity markets. By understanding the forces at play you can make better decisions about your finances, business or investments in 2025.