Diversified commodity exposure is expected to continue performing well in 2025 to hedge against inflation and economic uncertainty. Specifically, it is expected that the performance of gold and silver will surpass that of the entire industry.

Although Ole Hansen, the head of commodity strategy at Shengbao Bank, is optimistic about the forecast for 2025, he advises investors to have a discerning eye when building a basket of commodities in their investment portfolio. Gold and silver remain his two top choices after their historic performance in 2024.

Hansen said he expects gold prices to rise to $2900 per ounce this year, up 7% from the current level. However, Hansen believes that silver has greater potential and expects silver prices to reach $38 per ounce, an increase of nearly 30% from current levels. He added that he believes the outlook is biased towards an upward trend.

When it comes to gold, Hansen pointed out that it will still be an important safe haven asset in 2025.

He said: "The increasing uncertainty of the geopolitical situation has driven the demand for investment metals. Under this situation, global tensions and economic changes have prompted investors to seek more secure assets, which shows no signs of diminishing soon. In addition, the growing concern about global debt, especially the concern about US debt, has prompted investors to turn to precious metals to hedge against the risk of economic instability."

But he added that as the Federal Reserve shortens its easing cycle, investors need to remain patient. At present, the market expects only one interest rate cut this year, which is in sharp contrast to expectations from a few months ago. The Federal Reserve's tough stance may support the US dollar and bring some volatility to the precious metal market.

Despite some unfavorable factors, Hansen is more optimistic about silver as it plays a dual role as both a currency and an industrial metal.

He said, "The growth in industrial demand in 2024 has helped the silver market experience physical tightness. Industries such as electronics and renewable energy, especially photovoltaic technology, have made significant contributions to this growth. Expectations of sustained industrial demand may lead to a shortage of silver supply until 2025, and the increase in ETF 'paper' demand may exacerbate this situation

As silver continues to outperform gold, Hansen expects the gold to silver ratio to drop from the current 88 to around 75.

His bullish stance on silver is consistent with his overall outlook on commodities. He believes that compared to metals related to construction, metals involved in global economic electrification have more potential.

He said, "In industrial metals, we maintain a long-term bullish view on metals that support energy transition, especially copper and aluminum, driven by investments in the power grid and the rapid growth of renewable energy installations from electric vehicles to solar and wind turbines. On the other hand, we believe that iron ore and steel, which rely on demand from the construction industry, have limited upside potential.