Jim Wiederhold — Institutions Want Commodities Again, 3 Reasons Why

0:24 The three reasons institutions hold commodities — the third one is new

• The two classic reasons: diversification ("the most uncorrelated of the major asset classes") and inflation hedging over time.
• The third, which showed up over the last year-plus: resource security — "countries, governments making sure that they have enough resources, their critical materials within their borders."
• Why now: the 2020s have already delivered an inflation shock, geopolitical disruption, and rising anxiety about sourcing critical inputs — all three in a single decade.

1:48 Energy is front-of-mind — and the ETF flows front-ran the spike

• Looking at ETF flow data, "there was a lot of allocation of commodities right before the spike" — the participants who re-engaged with the asset class got in at a great time.
• When the US–Iran war started, "the prices of every petroleum-based product basically doubled. Some of them even more."
• Result: one of the biggest rises in the BCOM energy index over any 6-month period. Tensions have cooled, prices have not — "still very elevated."

3:03 Copper — positioning is already at a 5-year record

• Pulling the CFTC managed-money report on the terminal: copper net longs are "almost near record… at least in the last 5 years." The trade is already crowded on the long side.
• The reason is fundamental, not tactical: the move from a fossil-fuel economy to an electricity-based one needs industrial metals, and copper "is one of the most important in that time frame."

3:35 …against a supply side that cannot respond inside a decade

• Miners have had "several years of underinvestment in their capacity," and it can take up to a decade from discovery to a producing mine.
• So while global growth readings stay okay, demand can keep building and supply structurally cannot follow — that asymmetry is what people have positioned for.

4:51 The oil shock — 20% of exports shut off, so why no $200 oil?

• "We immediately had 20% of oil exports shut off," plus damage to oil infrastructure that will take time to bring back online.
• Three offsets kept the price out of the $200 range: China pulled back on its growth levers at exactly that moment so its demand came off; the US stayed the world's largest producer and kept increasing output; and supply has partially returned.
• His honest caveat: "it's hard to forecast when there's a lot of moving pieces." Prices have softened a little since.

6:18 The stagflation call — the inflation half arrived, the growth half didn't

• Business uncertainty (tariff announcements, geopolitics) may have softened global growth by delaying capex; clarity would let it ramp. "It could go either way here on the growth front."
• Some of the highest headline inflation readings in 3 years — but core inflation, which is what the Fed watches, has stayed relatively muted, so expectations are still anchored.
• Unemployment has picked up a little. Economic data "has mostly held up," so the stagflation pattern is not confirmed.

7:33 A new Fed, and the standing rule about geopolitical headlines

• "There's a new Fed in place. So there's uncertainty of the path of rate moves from here."
• His standing generalisation: geopolitical news headlines "always tend to lead to higher commodity prices" — moving past them would instead release investment impetus into markets.

8:45 The precious→industrial rotation call, scored at the half-year

• His key 2026 theme was that industrial metals would outperform precious after gold's 2½-year run and last year's silver / platinum / palladium melt-up.
• Both peaked in January; "a pretty big drawdown after that happened. So clear profit taking."
• The historical pattern he leans on: whenever gold runs for 2½–3 years, a decent consolidation follows — "sometimes over years."

9:50 Gold — the dollar is the near-term driver, the central banks are the long-term one

• What has actually driven gold lower over recent months is US dollar strength — "whenever the US dollar strengthens, that tends to be a headwind for gold prices, and you're seeing that play out."
• Counterweight: the World Gold Council's central-bank survey just printed its biggest-ever reading for expectations of buying more bullion.
• How he uses it: "that tends to be a precursor to another rise in gold prices… a good leading indicator. It's just uncertain how much time spans before it actually moves" — next year, or three, or five.

10:58 The BCOM sector scoreboard at the half-year

• BCOM industrial metals: about +10% ytd. BCOM precious metals: negative on the year. "For now, that call is working."
• He immediately hedges it — six months left, uncertain path — but the industrials still carry the supply constraint plus the fundamental demand story.

11:35 Aluminium and tin — and why BERY beat BCOM this quarter

• Aluminium drew attention because it was disrupted by the Middle East tensions too.
• Tin is up nicely on a much smaller market. It is not in BCOM but is in the Bloomberg Enhanced Roll Yield index, whose wider universe "slightly helped with the outperformance of BERY versus BCOM, particularly this quarter."

12:52 Silver — 60% industrial, and an exponential move always pays a consolidation

• Gold and silver are down by similar single-digit percentages ytd, but they get there differently: silver is 60% industrial in nature, so sometimes it tracks gold and sometimes the industrial complex.
• The pattern rule again: silver had "an exponential move higher in price over that two-month period. And when that happens, there always tends to be a pretty long consolidation period after that."
• He thinks gold, not silver, leads if uncertainty persists — silver is a much smaller market, and gold is the store-of-value/safe-haven bid.

13:14 An oddity: gold traded with risk assets after the spike

• Gold "tends to be completely uncorrelated," yet over the last few months it moved alongside equities as portfolios were rebuilt and investors felt more certain about the geopolitical path.

14:21 Regime analogy — the 1970s, not the 2000s

• 1970s: an oil shock cuts supply, prices spike, gold rises alongside, and the move spreads "across the entire commodity landscape."
• The transmission mechanism is mechanical: energy is an input to producing every other commodity — you need power to grow grain and to dig metal — so energy leads by raising the producer's cost of doing business.
• Why the 2000s comparison breaks: that super-cycle ran on globalization; today's runs on deglobalization — buyers pick the strategic supplier close to home over the cheapest global one, and pay more for it.

16:32 Two different buyers: institutions build allocations, retail buys themes

• Institutions have moved back on a strategic asset-allocation basis, not a tactical one — a portfolio-construction decision made over the last one to two years, then trimmed tactically into strength.
• Retail comes at it through stories: AI power demand, AI infrastructure metals, the energy transition, nearshoring/critical metals, and climate-driven extreme weather (which he says "could argue for exposure to a global grains basket").

18:03 The flow evidence — a 5-year high in commodity ETF assets

• Commodity ETF assets hit roughly a 5-year high in Q1; part price, but "also a lot of inflows" versus the indifferent 2010s.
• The performance pull is now positive: BCOM total return is still over 11% annualised over 5 years, and once the 1/3/5-year numbers flip from negative to positive, "people are starting to chase those returns."

19:12 Closing summary — three lines

• "Commodities have definitely reemerged as a strategic asset allocation."
• "The industrial metals story has strengthened."
• "Gold has come off, but it still refuses to step aside from the conversation" — and supply security is the big new investment theme of the last year and a half, only strengthened by 2026 so far.