(Bloomberg) -- Commodities usually rally when central banks cut interest rates, bolstering the case for going long raw materials in the coming months, according to Invesco Ltd.

In months before and after the start of easing cycles, raw material prices typically have positive returns, according to Kathy Kriskey, senior commodities and alternatives strategist at the asset manager. Gains have been particularly large when a soft landing has been achieved, bolstering the case for holding the sector as part of a wider portfolio, she said. 

Federal Reserve officials held interest rates steady last week and narrowly maintained their outlook for three interest-rate cuts this year. Meanwhile, traders are betting that other central banks from the UK to Europe will also cut borrowing costs this year.

“Everyone’s focusing on other asset classes, but we’ve looked at commodities in these past five easing cycles, and commodities actually did well,” Kriskey said in an interview. “The fundamental story is good. As people get more comfortable with the economic environment, they will spend more money.”

Raw materials prices have been buoyed in recent weeks, aided by surges in the cost of copper, cocoa, crude and gold. Until now, 2024 had been dominated by reduced price volatility as most markets remained amply supplied. 

Goldman Sachs Group Inc. said this week that commodities could return more than 15% this year as borrowing costs come down, manufacturing recovers, and geopolitical risks persist.

Invesco runs several exchange traded funds in the commodities space with assets of about $10 billion. Its biggest, known by the ticker PDBC, has about $4.7 billion in assets and has seen a mix of inflows and outflows so far this year. 

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