"Prices of Raw Materials Like Gold and Copper Keep Rising"... Here's Why

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There are growing expectations on Wall Street in the U.S. that the recently surging commodity prices will continue their upward trend. This is due to major central banks in the U.S., Europe, and other key countries planning to cut benchmark interest rates within the year, which could boost the industrial and consumer sectors.

Analysts Samantha Dart and Dan Struyven of Goldman Sachs forecasted in an investor memo on the 24th (local time) that commodity prices could rise by 15% this year due to lower borrowing costs from interest rate cuts, a manufacturing recovery, and ongoing geopolitical risks. In particular, copper, aluminum, gold, and oil are expected to see price increases. By the end of the year, copper is projected to reach $10,000 per ton, aluminum $2,600 per ton, and gold $2,300 per ounce.

It is no exaggeration to say that an "everything rally" has unfolded in the commodity market this year. Oil prices recovered to around $80 per barrel due to extended production cut agreements among major producers and expectations of increased global demand. Gold prices surpassed the all-time high of $2,200 per ounce. Copper prices, amid supply concerns, have surged more than 10% over the past six weeks, reaching an 11-month high.

All of this is a result of increased risk asset preference driven by expectations of U.S. interest rate cuts and a weaker dollar. China's announcement of additional support measures for economic recovery also positively impacted the commodity market. Goldman Sachs stated, "In an environment without a recession, U.S. rate cuts lead to rising commodity prices. Metals like copper and gold surge the most, followed by oil," adding, "The important point is that eased financial conditions tend to amplify price pressures over time, much like how growth shocks are filtered out."

Earlier, Macquarie Group also predicted that the commodity market could enter a rising cycle supported by supply shortages and global economic improvements. Jeff Curry of Carlyle Group identified the Federal Reserve's rate cuts as a key factor driving commodity prices higher. JP Morgan sees particularly strong upside potential for gold among commodities.