Position for commodity upside
We believe commodities can provide both a structural source of return and portfolio defensiveness in scenarios where higher inflation expectations challenge equities and bonds. While commodities have historically offered valuable diversification benefits due to their relatively low correlation with traditional asset classes, we also see a supportive longer-term backdrop driven by electrification, rising power demand, AI infrastructure investment, and supply constraints across several markets. In our view, investors should maintain diversified exposure across precious metals, energy, industrial metals, and agriculture to capture a broad range of opportunities. Given fast-shifting leadership within commodity markets, we think an actively managed approach can help investors navigate the commodity upcycle.
Gold
Gold may face further near-term volatility following the Federal Reserve’s latest rate hike, which could keep US real yields and the dollar elevated. However, we do not believe the strategic investment case has changed. Looking ahead, however, we believe central bank demand, continued diversification away from the US dollar, and global debt concerns will remain important structural supports. For investors with substantial gains following the strong rally over the past year, higher prices may provide an opportunity to rebalance some exposure into other commodity sectors. We continue to view gold as a useful strategic diversifier, and we remain constructive on gold prices over the next 12 months. We see silver as less attractive on a relative basis.
Energy
The ongoing conflict between the US and Iran highlights the fluid nature of geopolitical events and how they can impact energy. With crude supply remaining restricted and both sides escalating their military response, uncertainty over how quickly shipping conditions and production will normalize is likely to keep energy markets sensitive. Stronger Chinese imports and continued risks to Middle Eastern oil flows add to the potential for near-term price gains. In our view, energy exposure can help protect against lingering supply uncertainty and inflation spillovers, while robust demand supports a constructive medium-term outlook.
Industrial metals
Industrial metals, such as copper, have benefited from secular demand drivers such as electrification, the energy transition, and the ongoing global buildout of AI infrastructure. The recent pullback in base metal prices offers an opportunity to gain exposure, in our view. While factors like tariffs and trade policy risks may keep prices volatile in the near term, supply is constrained and demand trends remain constructive for the asset class. In copper specifically, supply constraints and projected market deficits reinforce our positive longer-term outlook.
