Opportunities in currencies and commodities

We see a variety of opportunities to enhance and diversify portfolio returns in the currency and commodity spaces​.

First, although the US dollar could remain well-bid in the near term, we expect it to weaken over the medium term as US interest rates are cut and fears rise about the US fiscal deficit. As a result, we recommend selling dollar rallies. Second, with the SNB unlikely to cut rates much further from here, we expect the Swiss franc to appreciate. Finally, we see opportunities in a broad range of commodities, including oil, copper, gold, and silver.

Sell dollar rallies

The dollar index has risen nearly 4% year-to-date amid decent US economic data and interest rate cuts in other major economies. But we believe investors should use periods of near-term dollar strength to reduce dollar exposure or to engage in volatilityselling strategies to generate income, ahead of likely Fed rate cuts later this year.

The US dollar is not cheap-it stands at levels comparable to the mid-1980s and the early 2000s in real tradeweighted terms. We think that depreciation pressures could mount if markets start to price a deeper Fed rate-cutting cycle. Fears about the size of the US fiscal deficit may also contribute to a weaker greenback over the longer term.

A Republican sweep of the White House and Congress could spur expectations of a stronger dollar. However, with more limited fiscal headroom and a US dollar that is already 17–18% stronger than when President Trump first came to power, we would expect this effect to be weaker than during Trump’s first term.

Swiss franc appreciation

We have a most preferred stance on the Swiss franc. The currency has depreciated by 5% year-to-date against the US dollar, with the SNB the first major central bank to cut rates. We expect the Swiss franc to appreciate from here and move the currency to most preferred from neutral. We still believe the SNB will lower its policy rate further but only to 1% from 1.25% after June's rate cut. Additionally, the franc is renowned for its safe-haven qualities, offering stability amid political uncertainty in Europe, the US, and elsewhere.

Opportunities in commodities

We see opportunities in a broad range of commodities. We forecast Brent crude oil prices to end the year at around USD 87/bbl (from USD 85/ bbl at the time of writing) amid solid demand and efforts by OPEC+ to balance the market. Risk-tolerant investors could consider selling Brent’s downside price risks. For copper, we expect the market to remain in a deficit from a fundamental perspective and forecast the metal to reach USD 11,500/mt by the end of the year (from USD 9,786/mt today).

We also see upside for gold and silver prices. In our base case, we forecast the gold price rising to USD 2,600/oz by the end of the year and USD 2,700/oz by mid-2025 (from USD 2,330/oz today). In recent years, central banks have increased their gold purchases as they seek to diversify their reserve holdings. In the build-up to the US election, we also think gold could be an effective hedge against growing concerns about geopolitical polarization, the US deficit, and/or higher inflation. We see silver prices rising to USD 38/oz by mid-2025, with industrial demand likely to benefit from higher use in renewables and electronics.

Investors can also gain indirect exposure to these copper and gold opportunities through select mining stocks.

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