Quarterly insights from Global Resources Portfolio Manager Shawn Reynolds, featuring his unique views on natural resources and commodities.
Despite outperforming broad U.S. equities, resource equities delivered mixed results in the first quarter of 2025. Base metals, precious metals and natural gas producers led the way, supported by strong underlying commodity prices—most notably copper, gold and natural gas. In contrast, most oil producers struggled as crude prices retreated below $70/bbl.
The dominant macro themes during the quarter included the potential downstream impact of the Trump Administration’s tariffs on commodity markets and resource equities, as well as an increasingly uncertain global growth outlook.
Sector Performance Recap
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Gold – Gold and gold mining stocks were the top performers during the quarter. Gold prices advanced above $3,100 per ounce, driven by sustained central bank buying, a resurgence in gold ETF demand and heightened geopolitical risk. Gold miners benefited from record margin expansion, supported by elevated gold prices and relatively stable operating costs.
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Base Metals – Copper led the strength in base metals, rallying approximately 25% during the quarter. Most base metal miners saw share price gains in response. Trade policy dominated headlines, as the Trump Administration implemented 25% tariffs on imported aluminum and steel, while also floating the possibility of similar duties on copper. Ongoing skepticism around China’s ability to reinvigorate its economy remained a headwind for the sector overall.
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Oil & Gas – Oil prices faced significant pressure during the quarter, falling below $70/bbl after OPEC+ signaled its intentions to ease production caps that had been in place for over two years. Further weighing on the sector was a deteriorating global growth outlook, with the International Energy Agency downgrading its oil demand forecasts. Natural gas producers fared better, buoyed by modest price gains and growing optimism around gas’ role in meeting incremental electricity demand.
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Agriculture – Agricultural commodities and equities posted modest gains during the quarter. Supportive fertilizer prices and resilient crop prices underpinned performance. Agricultural machinery stocks also fared well, defying headwinds from "higher for longer" interest rates and the potential drag from upcoming trade tariffs.
Looking Ahead: Navigating an Evolving Landscape
Our outlook, written before the April 2 announcement of new tariffs by the Trump Administration, anticipates continued challenges and uncertainty in commodity markets driven by trade policies, geopolitical tensions and broader macroeconomic trends. While tariffs remain a significant concern, their broader impact on global economic growth is the more pressing issue for commodities. As we assess the landscape, we see resilience in key commodities, despite the ongoing risks.
The uncertainty introduced by tariffs influences both global economic activity and commodity demand. If tariffs slow economic growth, they could weigh on demand for key raw materials. However, commodities have endured similar cycles before, and market participants are prepared to adjust as needed.
Steel and aluminum remain focal points in the tariff discussion. U.S. steel producers have already responded by increasing prices, benefiting from the anticipated trade barriers. However, outside the U.S.—particularly in Canada, Mexico and Europe—producers could face headwinds. Energy markets have also absorbed some of the uncertainty. A 10% tariff on Canadian and Mexican energy imports is not expected to be a major disruptor, as price adjustments have already taken place. However, crude oil has struggled relative to other commodities, reflecting broader geopolitical uncertainties and shifts in global supply and demand. Meanwhile, natural gas has emerged as a more attractive opportunity, particularly within the U.S.
Beyond tariffs, a series of external risks continue to challenge commodities. Geopolitical tensions—ranging from conflicts in Ukraine and the Middle East to instability in Venezuela and OPEC+ production decisions—create a difficult operating environment. These factors have combined to form one of the most complex commodity landscapes in recent memory. Despite these risks, the resilience of commodity markets has been notable. China and Europe continue to roll out stimulus measures, helping to support demand even in the face of economic slowdowns. Whether global growth weakens significantly or stabilizes remains to be seen, but for now, many commodities are holding firm.
Despite the macroeconomic pressures, several commodities remain strong. Gold has reached record highs, underscoring its role as a safe-haven asset amid market uncertainty. Copper prices are also robust, reflecting tight supply conditions and long-term demand tied to electrification trends. Even agricultural commodities, which face potential challenges from Chinese retaliatory tariffs, have remained reasonably stable. In contrast, crude oil continues to lag behind, likely due to geopolitical uncertainty and shifting supply dynamics. This divergence has led to strategic shifts in positioning, with some investors reducing oil exposure in favor of U.S. natural gas, which presents a more favorable outlook. Additionally, selective steel exposure has been added, recognizing both tactical opportunities and long-term structural trends.
While commodity markets face considerable uncertainty, their resilience in the face of multiple headwinds is noteworthy. The interplay between tariffs, economic growth, and geopolitical risks will continue to shape the market, requiring investors to remain flexible. With supply conditions tight across several key commodities and demand supported by global stimulus efforts, the longer-term outlook remains constructive despite near-term challenges.
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By Shawn Reynolds, Portfolio Manager, Global Resources; Andrew Musgraves, Senior Product Manager
Originally published 10 January 2025.
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