Goldman Sachs: Commodities should be included in a "diversified" investment portfolio, with gold being the "strongest recommendation."

Faced with risks to the independence of the Federal Reserve and the concentration of supply chains, Goldman Sachs pointed out that commodities, especially gold, are becoming key tools for hedging risks in traditional assets.

On September 5th, according to news from the Chasing Wind Trading Desk, Goldman Sachs stated in its latest commodity strategy research report that although the expected returns for commodity indices over the next 12 months are moderate under the baseline scenario, investors should consider incorporating commodities into their portfolios for diversification, with gold being referred to as the "highest-conviction long."

The research report believes that the rising risk to the credibility of U.S. institutions and the increasing concentration of commodity supply have created "tail risks," which could lead to soaring commodity prices while stocks and bonds decline. Gold is listed by Goldman Sachs as the "most strongly recommended" investment target in the commodity sector, with the bank maintaining a target price of $3,700 per ounce for gold by the end of 2025 and $4,000 per ounce by mid-2026, noting that in extreme cases, gold prices could rise above $4,500 per ounce.

Goldman Sachs also emphasized in the report that three major structural trends (De-risking energy, Defense spending, Dollar diversification) are systematically tightening the supply and demand in the commodity market, particularly mentioning gold and copper, which have slow price responses to supply changes.

The Value of Commodity Diversification Becomes Apparent

The research report states that since spring, the market has shifted from tariff uncertainty to tariff reality, which has helped stabilize economic activity indicators and reduced the probability of a U.S. economic recession.

Nevertheless, Goldman Sachs believes that the current slowdown in U.S. job growth and the economic downside risks remain above historical averages. Against this backdrop, the appeal of commodities as a tool for portfolio diversification has further increased. Goldman Sachs expects the role of commodities in hedging inflation and extreme risks to become increasingly prominent.

Goldman Sachs' baseline scenario shows that the commodity index will only have moderate positive returns over the next 12 months.

The bank maintains a bullish outlook on gold (strong central bank purchases), copper (demand from electricity, infrastructure, and defense), and U.S. natural gas (liquefied natural gas exports), but expects the current oversupply in the oil market to worsen.

Goldman Sachs anticipates that strong non-OPEC (excluding the U.S.) oil supply growth will lead to a surplus of 1.8 million barrels per day in the global market by 2026, ultimately pushing Brent crude oil prices down to a low of $50 per barrel by the end of 2026.

Risks to Federal Reserve Independence Boost Gold Outlook

Goldman Sachs particularly emphasized the scenario risk of a compromised independence of the Federal Reserve. If the independence of the Federal Reserve is undermined, it could lead to rising inflation, falling long-term bond prices, declining stock prices, and a weakening of the dollar's status as a reserve currency. In contrast, gold, as a store of value, does not rely on institutional trust.

The research report points out that if private investors diversify their investments in gold more like central banks, the tail risk scenario could see gold prices even exceed $4,500 per ounce, which is already well above the mid-2026 baseline forecast of $4,000. Goldman Sachs estimates that if 1% of the funds in the privately held U.S. Treasury market flow into gold, assuming other conditions remain unchanged, the gold price will rise to nearly $5,000 per ounce. Therefore, gold remains the bank's most steadfast bullish recommendation in the commodity sector.

Increased Risk of Commodity Supply Concentration

The increase in commodity supply concentration poses another significant risk.

Goldman Sachs states that the concentration of supply for key commodities is rising, with major production areas often located in regions of geopolitical or trade disputes (such as the Middle East, Russia, and U.S.-China relations). In this context, tools like export restrictions and "resource weaponization" are frequently used, leading to frequent supply disruptions, increased price volatility, and upward pressure on imported inflation.

The report points out that the competition among major world powers for key resources has intensified the risks of supply disruptions and price volatility. Goldman Sachs cites the 2022 Russia-Europe gas crisis, as well as disruptions in the Red Sea and Panama Canal, to illustrate the impact of supply chain vulnerabilities on commodity prices.

Additionally, Goldman Sachs indicates that OPEC+'s idle production capacity is declining, making oil prices more susceptible to sharp increases in the event of supply disruptions.

Structural "3D Trends" Support Long-term Commodity Bull Market

Goldman Sachs emphasizes that three structural trends (De-risking energy, Defense spending, Dollar diversification) are systematically tightening the supply and demand in the commodity market.

1. Energy De-risking:

Global energy security policies are driving a wave of investment in power grids, significantly increasing copper demand. Goldman Sachs predicts that by 2030, investments related to power grids will contribute to 60% of the global copper demand growth, with copper prices expected to reach $10,750 per ton by 2027.

2. Increased Defense Spending:

Military spending in Europe is expected to rise from 1.9% of GDP in 2024 to 2.7% in 2027. Related expenditures on metal equipment will significantly boost the demand for industrial metals such as copper, nickel, and steel, providing substantial support for metal prices.

3. Central Bank "De-dollarization":

Since the West froze Russian dollar assets in 2022, global central bank gold purchases have surged fivefold, becoming the core driver of the 94% increase in gold prices since 2022. Emerging Asian countries are expected to continue large-scale gold purchases for several years, constituting a long-term institutional demand for gold