The 24-hour news cycle reminds investors that tariffs still remain a factor. As such, for those looking to get commodities exposure as a portfolio diversifier will want to make sure they allocate strategically. In terms of metals, gold is still illustrious in precious metals and copper could set the stage for strength in base metals.
VettaFi caught up with Kathy Kriskey, head of alternatives product strategy at Invesco, to discuss the state of commodities, including precious and industrial metals. Likewise, Kriskey was also featured at the Alternatives Symposium discussing current trends in commodities.
Gold Still Illustrious
When it comes to getting precious metals exposure, gold continues to showcase its luster, though surprise tariffs may have thrown the markets for a loop before it was confirmed that no tariffs on imported gold would be levied. As such, the precious metal continues to trade above the $3,400 per ounce mark, rising almost 30% for the year.
Furthermore, demand for gold doesn’t appear to be waning anytime soon. VettaFi senior industry analyst Kirsten Chang emphasized this by referring to an audience survey during the Alternatives Symposium. 66% of respondents said they would maintain their position in gold.
The demand drivers for gold should continue to buoy its price, which includes the voracious appetite for gold by central banks. The effect of de-dollarization is already manifesting itself in central banks stocking up their gold reserves, which remained steady during the month of June, per a Kitco News report.
“Central banks reported 22t of net purchases in June via the IMF and other public data sources,” said Krishan Gopaul, senior analyst, EMEA at the World Gold Council. “Based on available data, demand saw a modest m/m increase for the third consecutive month.”
Precious Metals Shine on the Larger Economy
Furthermore, fundamental drivers of increasing gold exposure by retail investors still remain. Geopolitical tensions and tariff risks will continue to induce a dose of market uncertainty. In turn, gold will continue to remain an option as a safe haven asset to counter any future volatility, should another sell-off event, like the one witnessed in April, happen again. Additionally, the anticipation of easing monetary policy should also apply downward pressure on the dollar and benefit gold.
Silver prices have also risen almost 30%, like gold, driven by strength in the broader economy as it serves as an industrial metal in addition to a precious metal. Speaking to its latter benefit, investors can consider silver as a more cost-effective means to get precious metals exposure versus the more expensive gold.
On that note, investors can track the upside in the price movements of both with the Invesco DB Precious Metals Fund (DBP). The fund consists of futures contracts in both gold and silver, thereby allowing for easy access to the spot price movements of both precious metals as a portfolio diversifier.
Copper Demand Is Electrifying
Copper has been on the radar since U.S. president Donald Trump flagged the industrial metal for potential tariffs following a comprehensive investigation. That resulted in a recent 50% tariff imposition under Section 232 of the Trade Expansion Act on various categories of copper imports outlined by the White House.
Prices of copper did fall in the near-term as a result of the announcement, but the long-term prospect of copper hinges on global electrification. From electric vehicles (EVs) to increased power usage by data centers to support artificial intelligence (AI) applications, the demand for electricity and thus, copper, creates investment opportunities with exponential growth. And, as Kriskey pointed out, the copper mining process from exploration to extraction can be lengthy, applying pressure on supply. In tandem with demand for copper that may not diminish anytime soon, it creates a bullish catalyst for copper prices.
Those interested in the upside potential of copper will want to take a look at the Invesco DB Base Metals Fund (DBB). Like DBP, the fund offers exposure to spot prices for copper by way of futures contracts. DBB also includes exposure to aluminum and zinc, combining their own unique industrial benefits alongside that of copper.
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