Since the Federal Reserve announced that it would look to lower interest rates in 2024, rates are rapidly falling. The U.S. dollar has also weakened significantly, which is not unusual when rates drop. This is due to there being less incentive to save money in a country’s currency when its rates are lower. As a result, I expect the dollar to weaken significantly further in 2024 as rates continue to fall. A weaker dollar is bullish for commodities to watch as it will take more dollars to buy the same amount of each commodity. China’s recent decision to add $137 billion to its national debt will also boost the economy, if only due to the country’s size. The EV revolution and the energy transition are also bullish for certain commodities to watch.
Silver
In addition to the weaker dollar, silver, which has climbed about 15% since early October, is being boosted by multiple other trends.
One of these trends is the metal’s status as a “safe haven asset.” Conflict is starting to spread around the Middle East, as Israel is fighting a full-scale war with Hamas and engaging in daily exchanges of artillery fire with Lebanon-based Hezbollah. Moreover, the Yemen-based Houthis have become involved by seizing Western ships in the Red Sea. If the crucial region continues to be highly unstable, silver prices could rise further going forward.
Also noteworthy is silver’s extensive use in solar energy, hybrid vehicles and electric vehicles. In solar panels, silver is used to “conduct the electricity.” About 18 grams to 34 grams of silver are used in each hybrid vehicle, while 25-50 grams of silver are utilized in each EV. That’s way above the 15 grams grams of the metal historically used in each vehicle powered by gasoline or diesel.
With solar and EVs rapidly proliferating, the demand for silver could surge in 2024, causing the metal’s price to jump and making it an ideal option in commodities to watch.
Copper
Copper is widely used in many industries, including transportation, electricity generation and construction. As a result, the positive outlook of the global economy is bullish for copper.
China uses more copper than any other country in the world. As a result, its government’s recent decision to increase spending by $137 billion could boost the country’s economy, causing a surge in demand for copper.
Another catalyst for copper prices is the electrification of transportation, since the metal is used in almost all electrical wiring. Countries improving their grids to handle the increased demand for electricity will cause them to make large copper purchases.
Solar panels and wind turbines incorporate 5.5 and 4.7 tons of copper per megawatt of electricity generated, respectively.
Finally, gasoline powered vehicles, plug-in hybrid vehicles and EVs use 23 kilograms, 60 kilograms and 83 kilograms of copper, respectively. Consequently, as the popularity of plug-in hybrids and EVs increase tremendously, copper prices should surge. This is one option in commodities to watch.
Natural Gas
According to a recent report by New Scientist, “More than 300 million people in the US and Canada face the growing possibility of electricity shortages beginning as early as 2024 and continuing to 2028.” This can be caused by the tech industries increasing demand for energy and electrification of buildings and vehicles.
The need for new, highly reliable sources of electricity is likely to increase the demand for natural gas. The fuel is cleaner than coal and more reliable than wind and solar. Many natural gas plants could be built globally to deal with increased demand for electricity in the coming years.
Meanwhile, Europe is likely to keep avoiding buying Russia’s natural gas, forcing it to buy American natural gas. As a result, the floor on American natural gas prices will remain high.
On the date of publication, Larry Ramer did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
