Industrial and precious metals are in a horse race for the best year-to-date performance through May 22.

Silver is up 29.6%, gold is up 15.1%, and the Bloomberg Industrial Metals Index (including copper, aluminum, zinc, nickel, and lead) is up 17.7%.1 All three have bested the S&P 500 (+11.8%), Russell 2000 (+2.6%), the Bloomberg Aggregate Bond Index (-1.4%), US REITs (-2.7%), and treasury inflation-protected securities (TIPS) (-0.02%) returns year to date (YTD).2,3,4,5,6

What’s behind this outperformance?

Investors have been underweight commodities after they were disappointed at the level of China's stimulus measures in 2023 following the end of zero covid policies in late 2022.7 China is responsible for more than 50% of commodity demand, excluding energy, making it particularly impactful to commodity demand. However, the highly negative investor sentiment sent commodity prices below where fundamentals alone would price them.

Investors underweight to commodities occurred at a time when inventories were relatively low. Industrial metal inventories on the London Metal Exchange were at 25-year lows last January, and despite rising slightly since then, they remain closer to those lows than average levels.8 It will take little economic follow through to create supply deficits.

So, a step higher in price was overdue, and it has been a focus of our monthly updates for almost a year. But where to now?

Are investors still underweight?


ETF investors now own the same volume of gold as they did in 2019.9 The 750 tons of gold ETFs have sold in the last two years have reversed the large inflows into gold during the pandemic.

It is as if pandemic spending, US debt expansion, deglobalization, and structural labor market changes have never happened. Investors are underweight by almost any objective look at the US debt and deficit relative to GDP, currently at levels last seen during World War II.10,11

ETF sentiment may improve once the Federal Reserve starts cutting rates. A rate cut is prudent in June, given the weakness in some areas of the lower-income strata of the economy and lingering risks in the commercial real estate market.12


Futures positioning had risen quickly since the end of February when it was at very low levels. However, it has only risen slightly above the ten-year average and is not near extremes.13 Silver sentiment can mirror sentiment on the Chinese economy, with real estate company debt restructurings and property-specific stimulus helping to improve the outlook on China, industrial metals, and silver.

The gold/silver price ratio fell from an extreme 90 earlier this year to 77, as of May 23, as silver prices rose more than gold prices.14 The ratio is much closer to the average levels of the last ten years.


Based on Comex futures activity, investors have rapidly increased their allocation to copper from historically low levels to a ten-year high in the number of long contracts owned.15,16 Investors are no longer underweight; they are arguably overweight. How could this affect price and supply?

Unlike other commodities, such as cocoa (+83% YTD), copper does not have easy substitutes.17 Consumers will stop buying chocolate bars at a certain price, while copper consumers are price takers.

High copper prices have little long-term effect on demand and limited short-term effect on mine supply. High prices can bring additional scrap into the market. Since recycling scrap copper saves 85% of the energy used to create new copper, scrap is also financially attractive. Historically, scrap provides about one-third of the total copper supply, so it can make a difference in the short term.18 Large industrial buyers in China can cancel orders, lowering demand while they operate on stockpiled materials, but eventually, they will need to return to the market and purchase again.

A recent example of scraping is in Kenya, where the CEO of Kenya Power has called for a ban on scrap exports from the country to curb vandalism that targets the theft of electrical transformers after the company had 78 transformers stolen so far this year.19

A short-term pullback in copper prices is justified and possible with a short-term drop in demand or a short-term increase in scrap supply. However, demand is expected to expand from the ongoing energy transition in China, the US, and Europe through increased use of wind turbines, solar panels, nuclear energy, grid expansion, and energy-intense artificial intelligence data centers.

The medium-term price outlook on copper is still positive, even from lofty levels. The lengthy process of increasing mine supply has led to attempts to grow inorganically. BHP has proposed a takeover of Anglo-American in what could become the mining sector's largest merger deal.20


Investors are still very underweight oil. Over the last ten years, money managers have been long West Texas Intermediate oil, ranging from 290,000 to 866,000 contracts. As of May 23, they owned just 330,000 contracts – well below the average of 536,000 contracts.21

Despite a dramatic escalation of risk in the Middle East since October 7, 2023, oil prices have little geopolitical risk priced in. Gasoline prices are up 28% this year (wholesale) – enough to cause the Biden administration to sell one million barrels out of emergency stockpiles in the northeastern US to calm prices ahead of the presidential election in November.22,23 Oil and gasoline prices are of particular concern to all presidential incumbents because they can influence election outcomes.


New Caledonia is the third largest nickel producer country in the world. Still, French miner Eramet SA is running its local unit at minimum capacity after violent protests due to a change in voting rules. The potential voting rule change would give more power to recent immigrants, which the native population opposes.24

Final thoughts

Commodity prices in 2024 have responded to bullish fundamentals that have existed for most of 2023: that there are still areas of opportunity in the short term as the sector is, we believe, primarily under-owned.

The medium-term bullish trends remain in place as it continues to be challenging to start new mines, drill new oil rigs, and start new refineries and new smelters. Increasingly, contracts for commodity supply are placed with firms based on political relationships rather than with the most efficient or lowest-cost provider, adding to costs.

Finally, election risks remain elevated in 2024 with the potential for their results to disrupt supply chains.

1 Bloomberg Industrial Metals Commodity Index, gold and silver returns data 12/29/2023–5/22/2024.
2 S&P 500 Index, returns data 12/29/2023–5/22/2024.
3 Russell 2000 Index, returns data 12/29/2023–5/22/2024.
4 Bloomberg Aggregate Bond Index, returns data 12/29/2023–5/22/2024.
5 Bloomberg, US REIT (Real Estate Index Trust), returns data 12/29/2023–5/22/2024.
6 Bloomberg, treasury inflation-protected securities (TIPS), returns data 12/29/2023–5/22/2024.
7 Bloomberg, CFTC commodities futures trading commission Commitment of Traders report 1/1/2004–5/22/2024.
8 Bloomberg, London Metals Exchange, inventory data for copper, aluminum, zinc, nickel, and lead 1/1/2004–5/22/2024.
9 Bloomberg, ETF holders ounces of gold 1/1/2019–5/22/2024.
10 “Sounding the Alarm: America's unsustainable national debt.” Reverse the Curse: U.S. House Budget Resolution (FY24-FY33). House Budget Committee, May 2024.
11 "The Budget and Economic Outlook: 2024 to 2034." Congressional Budget Office, February 2024.
12 "A Really Bad Sign for Commercial Real Estate." Bloomberg, May 2024.
13 Bloomberg, silver long contracts 1/1/2014–5/23/2024.
14 Bloomberg, gold/silver price ratio 1/1/2000–5/22/2024.
15 COMEX is an abbreviation of The Commodity Exchange Inc. COMEX is the primary futures and options market for trading metals such as gold, silver, copper, and aluminum.
16 Bloomberg, copper long contracts 1/1/2014–5/23/2024.
17 Bloomberg, cocoa 12/29/2023–5/22/2024.
18 "Economics of the Copper Scrap Market." Investing News Network, September 2023.
19 "Kenya Power Urges Total Ban On Copper Exports to Curb Vandalism." All Africa, May 2024.
20 "Anglo American to Enter Talks With BHP After Rejecting $50 Billion Bid." Wall Street Journal, May 2024.
21 Bloomberg, WTI long contracts 1/1/2014–5/23/2024.
22 Bloomberg, RBOB 12/29/2023–5/22/2024.
23 "Biden releasing 1 million barrels of gasoline from Northeast reserve in bid to lower prices at pump." AP News, May 2024.
24 "Colonial past haunts latest New Caledonia crisis." France 24, May 2024.

Important information

The statements and opinions expressed are those of the author and are as of the date of this report. All information is historical and not indicative of future results and subject to change. Reader should not assume that an investment in any securities and/or precious metals mentioned was or would be profitable in the future. This information is not a recommendation to buy or sell. Past performance does not guarantee future results.
Trading in commodities entails a substantial risk of loss and is not suitable for all investors.
Diversification does not eliminate the risk of experiencing investment losses.
Prospectuses for abrdn Physical Gold Shares ETF, abrdn Physical Palladium Shares ETF, abrdn Physical Platinum Shares ETF, abrdn Physical Precious Metals Basket Shares ETF and abrdn Physical Silver Shares ETF
Projections are offered as opinion and are not reflective of potential performance.
Projections are not guaranteed, and actual events or results may differ materially.
ALPS Distributors, Inc. is the marketing agent.
There are risks associated with investing including possible loss of principal.
ALPS is not affiliated with abrdn.

ETF002199 5/1/25