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 as the Federal Reserve continues to hike interest rates, which could keep US real yields and the dollar elevated. Still, we think the strategic investment case is unchanged. Looking ahead, however, we believe central bank demand, continued diversification away from the US dollar, resilient ETF holdings, and global debt concerns will remain important 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
Renewed disruption to energy supply highlights the fluid nature of geopolitical events and how they can affect energy markets. While Middle Eastern oil exports have improved, they remain below pre-conflict levels, leaving the physical market tight and vulnerable to further disruptions. Emergency reserve releases may provide temporary relief, but they do not resolve this underlying tightness. 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. Tight physical market conditions continue to support copper despite recent price volatility. 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.
