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The commodity markets play a crucial role in our daily lives. From the diesel prices that affect commutes to the grocery bills that impact our wallets, these markets influence the costs of essentials we rely on. They can also contribute to and global tensions. Tracking the performance of different commodity sectors, such as precious metals, energy, and agriculture, could provide valuable insights into . We examine the commodity market and examine how major commodities performed in the first quarter of 2024 (1Q 2024). For centuries, precious metals have been a cornerstone of investor portfolios, particularly during periods of . Gold and silver, the undisputed leaders in this sector, possess a unique allure. Unlike fiat currencies, whose value can be manipulated by governments, precious metals hold inherent worth. New discoveries are rare, and these metals cannot be easily replicated, rendering them a scarce resource. Their physical properties are also valuable for industrial applications in electronics, jewellery, and other sectors. This limited supply, coupled with their inherent value, contributes to their . Kicking off 2024 strong, gold prices reached record highs in the first quarter. Starting at US$2,058 per ounce on 2 January, it continued its upward trend from December 2023. The first two months saw gold prices hovering around the $2,000 mark, with a brief dip below that level in mid-February. 13 February marked the quarter’s low at around US$1,992. However, gold prices started climbing again in March, reaching a new quarterly peak of $2,232 end-March. Geopolitical tensions and a solidifying belief that the US Federal Reserve would begin cutting rates as early as June could have helped drive buyers into the gold market. In all, gold prices rose 8.2% for the first quarter of 2024. Silver also saw a similar trajectory in its price as its cousin. At the end of 2023, silver price stood at US$23.76 per ounce, but that increased by 5.3% to US$25.02 on 28 March (the last trading day of the quarter). No other commodity matches the influence of energy on our everyday lives. Energy prices ripple through the entire economy, affecting the cost of everything we consume. From groceries and clothing to the electronics we rely on and the fuel powering our vehicles, energy costs are a hidden component. The same holds true for maintaining our homes, businesses, and essential services. Simply put, a world without readily available energy would struggle to meet basic needs. The industry consists broadly of fossil fuels and alternative energy. Traditional sources such as oil, natural gas, and coal constitute the fossil fuel side. Alternative energy sources include solar, wind, hydro, biomass, and geothermal. Here, let us explore a major part of the energy sector: crude oil. The WTI (West Texas Intermediate) and Brent are two of the most commonly traded crude oils in the world. Their main differences lie in their extraction locations, oil density, sweetness, transportation, and where they are listed. WTI crude oil is extracted from fields located in the United States while Brent crude is extracted from the North Sea near Europe. WTI crude oil contracts are traded on the New York Mercantile Exchange (NYMEX) while Brent crude’s main exchange is the Intercontinental Exchange (ICE). WTI crude oil rose 16.0% in 1Q 2024 to end the quarter at US$83.12 per barrel. Continued conflict in the Middle East is likely to have caused the increase in oil prices. Often overshadowed by their more prominent cousins, such as gold and oil, soft commodities play an indispensable role in our daily lives. This category includes a diverse array of agricultural products that are integral to various aspects of our daily consumption and economic activities. For instance, the versatile soybean not only serves as a crucial source of protein but also is a key ingredient in numerous food products and an essential component in animal feed. Similarly, lumber is a fundamental building block in the construction industry, vital for building homes and furniture. Even the meat on our dinner plates is classified as a soft commodity, with cattle and hogs being prime examples. These commodities are crucial not only for their direct consumption but also for their role in the broader food supply chain. The production and supply dynamics of these soft commodities can significantly influence global food prices and, by extension, economic stability. Soft commodities prices put on a strong showing as well in the 2024 first quarter. A report by shows that several soft commodities, like cocoa, coffee, sugar, cotton, and orange juice, have experienced a significant price increase in recent months. This rise is linked to El Nino, a weather pattern that disrupts crop growth, leading to lower production and limited supplies. Additionally, some countries imposed trade restrictions to preserve their domestic stocks, further affecting exports. Since there are too many soft commodities to track, we will use the S&P GSCI Softs index—which measures the performance of soft commodities weighted on a world production basis—as a proxy. For the latest quarter, the index soared around 23% to end March 2024 at US$156.32. For an alternative view, we can also use the Invesco Agriculture Commodity Strategy No K-1 ETF (ticker: PDBA) as a substitute to see how the soft commodity sector performed. The exchange-traded fund (ETF) in commodity futures, commodity-linked futures and collateral such as cocoa, coffee, cattle, soybean and corn futures. Similar to the index’s positive performance, as seen just above, the ETF rose almost 20% last quarter to end at US$35.74 on the last trading day of March. Looking ahead into 2024, several key factors affect how the commodity market will shape up. One major influence is lingering geopolitical tensions. Conflicts and regional instability can disrupt supply chains and inflate prices, particularly for energy commodities like oil and natural gas. The International Monetary Fund (IMF) recently , warning that ongoing tensions in the Middle East could trigger an increase in oil prices. On the other hand, a potential global economic slowdown could dampen overall demand for commodities, especially those heavily consumed by industrial production like metals. This could put downward pressure on prices. Monetary policy shifts could also play a role. As central banks worldwide slow down interest rate hikes or even begin cuts, the US dollar might weaken. This could make some commodities more attractive to investors seeking a hedge against inflation. Weather patterns are another wild card. Unpredictable weather events can significantly impact agricultural production, leading to price fluctuations for soft commodities like soybeans and wheat. Finally, the ongoing push for cleaner energy sources will likely continue to weigh on demand for traditional fossil fuels. However, this trend could boost the prospects of alternative energy materials like lithium and cobalt, which are crucial for the energy transition. Receive a Welcome Rebate of up to $150 when you trade with IG. Simply your account, and trade CFDs during your Welcome Period.* *T&Cs apply. CFD Losses can exceed deposits. Refer to Risk Disclosure Statement and Risk Fact Sheet at IG.com/sg