Quarterly Outlook
Equity outlook: The high cost of global fragmentation for US portfolios
Charu Chanana
Chief Investment Strategist
Commodities return: Why allocation matters
Ole Hansen
Head of Commodity Strategy
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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.
The table above compares three major commodity indices that are widely followed by institutional and retail investors alike: the Bloomberg Commodity Index (BCOM), S&P GSCI, and Deutsche Bank Optimum Yield Commodities Index (DBIQC). While the BCOM has outperformed over the past year, it lags behind the others on a five-year basis—primarily due to differences in sector allocation. BCOM, our preferred benchmark, tracks 24 major futures markets with a balanced distribution across energy, metals, and agriculture. By contrast, the S&P GSCI and DBIQC tracks a fewer number while maintaining a heavier weighting in energy markets. While BCOM has delivered a better return in the past year, it trails the other two on a five-year basis, the main reason being the individual allocations between the three funds. While the BCOM, as mentioned, tracks 24 major futures markets, spread almost equally between energy, metals, and agriculture, the other two have the bulk of their exposure across the energy sector. In the last year, the BCOM has benefited from exceptional gains in gold (46%), silver (18%), copper (7.4%), coffee (76%), and live cattle (21%). These five commodities represent 30.8% of BCOM’s total weighting—considerably higher than their 16.3% and 13.7% share in the S&P GSCI and DBIQC, respectively.
In summary, investors considering broad exposure to commodities should pay close attention to the strategic differences between indices. During periods of strong economic growth—particularly in resource-intensive emerging markets—energy and industrial metals tend to outperform. However, in times of financial uncertainty, such as the current environment marked by inflation concerns and political tensions, indices with a heavier weighting in precious metals and agriculture may offer better protection and diversification, the latter being somewhat uncorrelated but still supported during periods of dollar weakness.
Recent commodity articles:
16 April 2025: Whats next as gold hits our USD 3300 target
15 April 2025: COT Reports show hedge funds racing to cash post-Liberation Day
11 April 2025: Commodities weekly As chaos reigns whats next for markets
10 April 2025: YouTube Interview: Gold, silver, copper, oil - prices, supply, demand in 2025
8 April 2025: Golds deleveraging pullback fails to shake supportive outlook
8 April 2025: Golds deleveraging pullback fails to shake supportive outlook
7 April 2025: COT on Forex and Commodities - April 7 2025
4 April 2025: Commodities weekly Tariff-led recession pain triggers sharp reversal
3 April 2025: Tariff-related recession fears ignite widespread commodities selloff
2 April 2025: Commodity Outlook: Commodities rally despite global uncertainty
31 Mch 2025: COT Report: Ongoing USD selling amid mixed week for commodities
26 Mch 2025: Commodities show strength in Q1, led by a select few
25 Mch 2025: Crude oil Sanctions threat counters tariff-driven demand worries
24 Mch 2025: COT on Forex and Commodities - 24 March 2025
21 Mch 2025: Commodities weekly: High-flying precious metal sees profit taking
19 Mch 2025: Has the gold express already left the station?
17 Mch 2025: COT Report: Silver and copper stands out in week of energy weakness
14 Mch 2025: Gold surges past USD 3,000 as haven demand grows
12 Mch 2025: Tariffs and the energy transition: Key drivers of copper demand
11 Mch 2025: Gold holds steady despite deleveraging risks in volatile markets
10 Mch 2025: COT Report: Wholesale reductions in speculators' USD and commodity longs
7 Mch 2025: Commodities Weekly: Tariffs, trade tensions, fiscal bazooka, and Ukraine
5 Mch 2025: Tariff threat disconnects HG copper from global market
4 Mch 2025: Stagflation and geopolitical tensions fuel renewed demand for gold
3 Mch 2025: COT Report: Broad retreat sees WTI longs slump to 15-year low
Podcasts that include commodities focus:
11 April 2025: US and China are slipping into an economic war
4 April 2025: Markets melts down as recession risks go global
1 April 2025: Bracing for Liberation Day
25 Mch 2025: Did Trump just blink?
18 Mch 2025: US market found support, but how durable will it be?
14 Mch 2025: Is silver set to shoot the lights out?
10 Mch 2025: US un-exceptionalism is the theme
7 Mch 2025: US bear market risks ratchet higher. EUR train has left the station
4 March 2025: Are we on the verge of a big whoosh?
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