Citi Wealth Insights

Commodities have boomed since the recovery from the first wave of the pandemic but now face uncertainties in 4Q’21 performance and larger unknowns into 2022 and 2023.

Citi analysts’ base case is neutral-to-bullish commodities in 2H’21, but the market faces an array of macro concerns that have caused financial flows to soften recently, not least the spreading of delta variant and tighter monetary policy.

Citi analysts expect this outperformance to continue at least through year-end, as the pace of recovery slows and some commodities demand growth peters out while some supply constraints are alleviated.

Commodity prices became a bit frothy two-thirds of the way through Q1, but are generally expected to rebound strongly in Q2 and through year-end.

Citi analysts expect that gold prices could hover between US$1,700-$1,900/oz range for the rest of 2021 and remove their overweight allocation as long-term yields reverse their plunge.

While Citi analysts believe that cyclical factors point to a strong metals price rebound for some time, this may not necessarily point to an overall commodity super-cycle.