Commodities Under Pressure: Navigating Trade Wars and Economic Slowdowns in Q2 2025

The global commodities market is at a crossroads in Q2 2025, buffeted by escalating trade tensions, policy volatility, and slowing economic growth. As the U.S. tightens its grip on trade and OPEC+ struggles to balance supply and demand, investors must sift through the chaos to identify asymmetric opportunities. This article dissects the risks and rewards in metals, energy, and precious metals, highlighting where macro headwinds could become catalysts for strategic gains.

Metals: Walking a Tightrope Between Trade Wars and Oversupply

The metals sector faces a dual threat: U.S. protectionism and a supply-demand imbalance.

Aluminum and Steel:
The U.S. maintains its 25% tariffs on aluminum and steel imports, shielding domestic producers but stifling global trade. Steel prices have risen to $900/short ton, yet demand growth has been slashed to just 2% due to recession fears. Meanwhile, global aluminum production is oversupplied by 200,000 metric tons, keeping prices muted.

Copper's Crossroads:
A pending 10% U.S. tariff on copper imports and slowing Chinese construction have dented demand. However, China's 1-trillion-yuan infrastructure stimulus—targeting industrial sectors—could offset some weakness. The metal's long-term fundamentals remain intact, but near-term volatility demands caution.

Investment Takeaway:
Avoid industrial metals like aluminum and steel, which are entangled in trade wars and oversupply. Copper offers potential but requires a long-term view, with geopolitical risks (e.g., China-U.S. tensions) as key variables.

Energy: OPEC+ Overproduction vs. Natural Gas's Hidden Gem

Oil prices hit a four-year low as OPEC+ unwinds production cuts, flooding markets with excess crude.

Oil's Oversupply Trap:
OPEC+ crude production rose to 22.22 mb/d in May 2025, exceeding targets. With global supply expected to grow 1.8 mb/d this year, Commonwealth Bank forecasts Brent crude could slump to $70/barrel. Investors should tread carefully here.

Natural Gas: A Structural Opportunity:
While oil flounders, natural gas presents a compelling contrarian play. U.S. LNG exports are surging (+22% in 2025), driven by new terminals like Plaquemines and Corpus Christi. Despite short-term price dips post-tariff announcements, storage levels remain below average, and European inventories are on track to meet winter targets.

The Henry Hub price is projected to rise to $4.10/MMBtu in 2025 and $4.80/MMBtu in 2026. Risks include geopolitical disruptions (e.g., Russia's reduced piped gas exports), but the long-term demand for cleaner energy and LNG's role as a bridge fuel make this sector a buy on dips.

Precious Metals: Silver's Turn to Shine

While gold soaks up the spotlight as a safe haven, silver is the underdog with structural tailwinds.

Gold's Safe-Haven Rally:
Central banks and investors are piling into gold, pushing prices toward $3,000/ounce. Geopolitical risks (e.g., Iran-Israel tensions) and inflation fears justify this momentum. However, gold's valuation is now at historic highs, requiring caution on further upside.

Silver's Industrial Catalyst:
Silver is the unsung hero of the green economy. Solar demand—its largest driver—is surging as photovoltaic installations hit record highs. Analysts like J.P. Morgan see a “catch-up rally” for silver, with price targets of $40/ounce by year-end and $52.50 in 2026. The gold-to-silver ratio (now ~100:1) suggests silver is deeply undervalued relative to its industrial and monetary potential.

Investment Playbook:
- Silver: Buy physical bullion or the Sprott Physical Silver Trust (PSLV), which holds unencumbered London good delivery bars.
- Natural Gas: Use ETFs like UNG or futures contracts to capitalize on storage deficits and LNG demand.

Navigating the Storm: Where to Deploy Capital

The commodities market is a minefield of risks, but opportunities lie where macro headwinds mask undervalued assets.

1. Silver: Industrial demand and a supply deficit create a compelling case.
2. Natural Gas: Structural underinvestment and geopolitical shifts favor long positions.
3. Avoid Industrial Metals: Until trade tensions ease and demand stabilizes.

Final Note:
Investors should treat this environment as a “value hunt,” focusing on sectors where fundamentals outpace sentiment. Silver and natural gas offer asymmetric upside, while gold and oil remain polarized plays. Stay nimble—macro surprises (e.g., OPEC+ cuts or U.S. tariff reversals) could shift the landscape overnight.

Gary's Bottom Line:
In a world of policy chaos, silver and natural gas are the quiet giants of 2025. Their valuations, driven by industrial demand and geopolitical realignments, make them buys now—and potentially game-changers by year-end.