Citi analysts believe a potential Donald Trump presidency, with odds of winning the 2024 US election now at ~66%, could significantly impact commodity markets.
A "red wave" election result also seems increasingly plausible, they said in a note Thursday.
The investment bank told investors that the most critical change for physical commodity markets under Trump would be the proposed implementation of major tariffs on US imports.
These tariffs wouldn't be enacted for at least 12 months due to the required USTR Section 301 process and subsequent approval period. This delay allows the Fed and ECB to cut rates, supporting Citi's bullish outlook on precious metals over the next 6-12 months.
Citi sees gold rising to $2700-3000/oz and silver to $38/oz during this period. Analysts believe that the anticipation of trade war escalation between the US and China could drive investors to hedge, further supporting precious metals.
However, they note that a stronger dollar might limit absolute upside, favoring gold outperformance over other commodities and risk assets.
China is expected to respond to potential tariffs with policy easing, likely focused on the energy transition, benefiting metals like copper and aluminum. Despite anticipated headwinds, Citi maintains its 2H25 forecasts of $12k/t for copper and $2.8-3k/t for aluminum, expecting China to counterbalance tariffs with significant stimulus measures in renewable energy and EV sectors.
Citi's bearish outlook for oil prices in 2H25 aligns with expectations of reduced global trade. Analysts state that Trump's possible reintroduction of sanctions on Iran would likely be less impactful, and other policies might marginally depress crude oil prices. In addition, the bank says a ceasefire in Ukraine and a stronger US-Saudi relationship could increase oil supply, adding further pressure on prices.
In agriculture, a trade war could lower CBOT row crop prices by isolating US soybean and corn supplies, benefiting Brazil's cash basis, according to Citi.
The bank does not anticipate significant impacts on US EV development from a Trump presidency, suggesting that even with relaxed EV mandates, the rollout of hybrids and continued EV subsidies could sustain growth in this sector.