UBS sees total returns of ~10% for commodity indexes over the next 6-12 months

UBS expects total returns of around 10% for broad commodity indexes over the next six to 12 months, supported by a recovery in global industrial activity, the prospect of lower interest rates, it said in a note on Wednesday.

Among other factors, brokerage lists commodity-specific supply-side constraints, which should combine to push prices higher.

Earlier this month, the investment bank raised Brent crude (CO1:COM) prices in a range of $85–95/bbl over its forecast horizon, supported by a likely undersupplied market—given solid demand and OPEC+ supply discipline.

Furthermore, UBS also sees scope for gold prices (XAUUSD:CUR) to rise further by the end of the year, with a December price target of $2,500/oz, arguing that, both oil and gold have value in a portfolio context, particularly to help hedge geopolitical risks.

Among industrial metals, UBS highlights a scope for high-single-digit upside in prices over coming months, supported by firmer demand and supply-side constraints. Copper (HG1:COM) remains its “metal of choice”, while stating that the main risks to the positive industrial metal view continue to stem from China’s struggling property sector.

La Nina risks return

UBS has revised up expectations for corn and soybean prices in 2024–25, owing to elevated short positioning and rising prospects of a return of La Niña. Conversely, supply shortfalls in cocoa and coffee, while acute now, could ease in 2025.

Where to invest?

UBS says, diversify with gold, as the brokerage continues to recommend investors use the safe-haven metal as a diversifier, despite having a ‘neutral’ stand.

On an individual commodity level, UBS sees opportunities to engage in selling downside in crude oil, silver and platinum.

Commodity ETFs

Gold ETFs:

• SPDR Gold Shares ETF (GLD)
• VanEck Gold Miners ETF (GDX)
• VanEck Junior Gold Miners ETF (GDXJ)
• iShares Gold Trust ETF (IAU)
• Direxion Daily Gold Miners Index Bull 2X Shares ETF (NUGT)
• Sprott Physical Gold Trust (PHYS)

Other Metal ETFs:

• iShares Silver Trust ETF (SLV)
• Sprott Physical Silver Trust (PSLV)
• Global X Silver Miners ETF (SIL)
• U.S. Copper Index Fund, LP ETF (CPER)
• abrdn Physical Palladium Shares ETF (PALL)

Agriculture ETFs:

• Invesco DB Agriculture Fund ETF (DBA)
• Teucrium Soybean ETF (SOYB)
• Teucrium Wheat ETF (WEAT)
• Teucrium Corn Fund ETF (CORN)