Commodities return: Why allocation matters

This content is marketing material

Key points:

• Being tangible assets, commodities offer investors both exposure to global growth and a hedge against inflation, currency depreciation, and broader fiscal instability.
• Despite growing headwinds, major commodity indices have recently outperformed most other asset classes; however, with a varying degree depending on the allocation to five top-performing commodities.
• Investors considering broad exposure to commodities should pay close attention to the strategic differences between indices—and, with that, their exposure to individual commodities and sectors.

The spotlight in the commodities market remains firmly on gold, which overnight surged to a new all-time high of USD 3,500—marking an impressive 33% year-to-date gain. This rapid ascent means the yellow metal has already reached our recently upgraded price forecast, far earlier than anticipated. Gold’s meteoric rise underscores a broader trend in the commodities space, which continues to be heavily influenced by macroeconomic and geopolitical developments—particularly the intensifying trade war between the United States and China. As the world’s two largest economies clash, concerns mount over its potential drag on global growth and the resulting impact on demand for pro-cyclical commodities such as energy and industrial metals.

Adding to the market turbulence, the Easter weekend saw renewed political pressure on the U.S. Federal Reserve. President Trump once again challenged the Fed's independence by publicly urging a rate cut, a move that rattled financial markets. Stocks slid further, and the U.S. dollar fell to a three-year low. In characteristic fashion, Trump directly targeted Fed Chair Jerome Powell, labeling him a "major loser" and accusing him of reacting "too late" to economic threats. His stark warning—“His termination can’t come soon enough”—has escalated what was previously a policy disagreement into a personal and politically charged standoff. This shift not only intensifies the pressure on the Fed but also serves to position Powell as a convenient scapegoat for a looming economic slowdown in the U.S.

Despite these growing headwinds, commodities have generally outperformed most other asset classes so far this year. Their appeal as tangible assets offers investors both exposure to global growth and a hedge against inflation, currency depreciation, and broader fiscal instability. However, the rally has been uneven: only a few commodities—namely gold, copper, silver, and coffee—have delivered double-digit returns. This divergence highlights the importance of understanding how the performance of broadly diversified exchange-traded funds (ETFs) can vary significantly depending on their underlying composition and current market dynamics.