Metals are spearheading gains in the commodities sector this second quarter, driven by significant re-evaluations in the prices of gold, silver, and .

According to Citi strategists, this performance is particularly impressive considering the typical sensitivity of both precious and industrial metals to the strength of the US dollar and shocks in interest rates.

“Indeed, prices for the underliers have soared despite the appreciating greenback and steep back-up in yields across the Treasury curve,” the strategists said.

“Our base case suggests the gold, silver, and copper rally has room to push another 5-10% over the next 0-3m and perhaps 15-20% in a 6-12m context,” they added.

Citi strategists anticipate a potential minor pullback in gold and silver markets before the end of the second quarter, but expect prices to surge in the second half of 2024, with gold potentially reaching around $2,500/oz and silver $30-32/oz.

They believe the significant market cap share and index weights of these metals, suggesting that a rally could broadly boost commodities returns and sentiment, especially against a backdrop of economic reflation and a soft landing.

“The structural rally in Comex gold is supplemented by a bullish momentum reading, where exchange open interest (OI) and trading volumes have seen steady rises and spikes over the last few weeks indicating robust liquidity and growing investor interest,” the Citi team noted.

Copper is expected to follow a similar, albeit slightly less bullish, technical path, they added.