Geopolitical risk and speculation lifting prices for now
The sharp rise and fall in precious metals prices, which appeared to be driven somewhat by leveraged investors, has all the hallmarks of a bubble. Our view is that, while there may be more episodes of extreme price swings, investment demand for precious metals will weaken and prices will end this year much lower than current levels. On a similar note, fading investor optimism will also lead to base metals falling, given that the overall demand backdrop remains weak.
Meanwhile, escalating geopolitical tensions between the US and Iran have contributed to higher oil prices. But we think that geopolitical fears will give way to weak fundamentals. Indeed, Kazakh oil output is set to recover following significant disruption in January. This will help push oil prices lower towards $50pb by end-26.
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