Is the case for commodities still intact?

“Oil prices have fallen sharply from recent highs as markets price a greater chance of Middle East de-escalation and recovering supply. But fragile shipping flows and low inventories leave energy markets vulnerable, while constrained supply and structural demand remain supportive for copper and other commodities. Investors may consider diversified, actively managed commodity exposure.

The supply premium in crude has eased in hopes of de-escalation.

• Brent crude has fallen to near USD 97/bbl, down from as high as USD 118/bbl at end October.
• Markets are pricing a more optimistic scenario after the “Blue Wave” US midterms and as President Trump indicates he may not strike Iran as diplomatic talks continue.
• Middle Eastern loadings have recovered substantially from earlier disruption, while softer demand expectations have also weighed on prices.

But commodity fundamentals remain supportive.

• Lower oil prices do not remove the supply constraints and structural demand drivers, while higher insurance and freight costs have raised the delivered cost of crude.
• Copper remains supported by constrained supply, and long-term demand from power grids, data centers, and electrification.
• Central bank buying, robust Chinese demand, and concerns over rising public debt should continue to support gold, despite high real yields and a firmer US dollar.

So, diversify exposure and manage it actively.

• Broad commodity exposure may diversify portfolios and provide protection against risks that challenge both equities and bonds.
• Different economic and geopolitical drivers can cause rapid leadership rotation across energy, metals, agriculture, and gold.
• A diversified, regularly rebalanced exposure is the simplest way to capture most of the asset class’s benefits. Investors must consider unique risks around volatility and holding costs.”

Investment view

Commodities can strengthen portfolio diversification amid geopolitical risks and structural demand from power and AI infrastructure. We favor broad, actively managed exposure, with a preference for copper and strategic gold holdings, sized appropriately for price volatility.”