Goldman Sachs: Global capital begins "hard asset rotation," commodities may welcome long-term premiums

Against the backdrop of increasing volatility in global stock markets, investors are accelerating the shift of funds from financial assets to hard assets such as commodities in search of safe havens. Goldman Sachs' commodity research team points out that this "hard asset rotation" may drive the prices of various metals to remain high for a longer period, even exceeding levels supported by their physical supply and demand fundamentals.

Goldman Sachs analysts indicate that client conversations reveal that, driven by rising macro and geopolitical risks, the willingness of investors to diversify into hard assets has become a key driving force in this round of commodity market trends. Hard assets typically refer to tangible physical assets such as commodities, real estate, and infrastructure, whose value-preserving properties in inflationary and uncertain environments are attracting funds away from traditional financial assets like stocks and bonds.

Research indicates that the upside potential for precious metals and copper in this round of rotation is higher than that for oil and natural gas. Goldman Sachs maintains its target price for gold at $5,400 per ounce by December 2026 and believes that the demand for asset diversification from the private sector may provide upward momentum. Copper prices are also benefiting from the hard asset rotation and strategic reserve demand, providing a basis for price increases.

Following the rebound in the metal market in 2025, most commodities continued their strong and volatile trends into early 2026. Goldman Sachs believes that the ongoing asset allocation adjustments by investors may keep the prices of certain metals (such as copper) at high levels for the long term, creating structural premiums.

Price Driving Mechanism of Hard Asset Rotation

Goldman Sachs research indicates that during the process of asset allocation shifting towards hard assets, there is a close correlation between investor positioning behavior and commodity prices. Due to the relatively small scale of the commodity market, inflows of funds can significantly push up prices in the short term.

The bank's analysis suggests that compared to oil and natural gas, precious metals and copper have greater price upside potential in this round of allocation shift, primarily based on three structural reasons: first is the difference in market depth. The scale of the metal market is much smaller than that of energy, so the marginal impact of equivalent fund inflows on prices is stronger.

Secondly, the elasticity of supply differs. Rising energy prices may quickly stimulate a response in shale oil supply, while copper mines are constrained by long-cycle projects, and the supply constraints for precious metals are more rigid.

Finally, there are storage and roll-over costs. Energy storage capacity is relatively limited, and the costs of rolling over futures may rise sharply; whereas metals are easy to store, and physically-backed precious metal ETFs do not even involve roll-over costs, making them more favorable for long-term capital holding.

Specific Impacts of Gold, Copper, and Oil

Goldman Sachs, through quantitative models, indicates that the current rotation towards hard assets is creating differentiated impacts on the prices of different commodities. Specifically, the sensitivity of price to fund inflows for gold, copper, and oil shows significant structural differences.

In terms of gold, model calculations show that for every 1 basis point (i.e., 0.01%) increase in the allocation of gold in U.S. financial investment portfolios, the gold price will correspondingly rise by about 1.5%. Based on this, Goldman Sachs believes that the ongoing diversification demand from the private sector may pose an upside risk to its target gold price of $5,400 per ounce by December 2026 The copper market is also sensitive to capital flows. A one standard deviation increase (approximately 10 percentage points) in the proportion of net managed funds to open contracts will push copper prices up by about 6.9% in the short term. However, over time (for example, one year later), due to increased supply of scrap copper and potentially slowing demand, this impact will diminish to about 4.2%. Goldman Sachs points out that the ongoing rotation into hard assets and strategic reserve demand may jointly constitute an upside risk for copper price forecasts.

In comparison, the oil market exhibits greater short-term elasticity to capital. A one standard deviation increase (approximately 2.7 percentage points) in the proportion of net managed funds may drive oil prices up by about 10% in the short term, with the increase tapering to 7.5% after one year. Goldman Sachs emphasizes that the rotation into hard assets combined with supply disruption risks triggered by geopolitical factors may further elevate oil price forecasts.

Market Outlook of "Higher Levels Sustained Longer"

Goldman Sachs analysis indicates that the current global capital rotation towards hard assets such as commodities may drive the prices of certain metals, represented by copper, to operate above levels determined by physical supply and demand fundamentals, creating a structural premium. This phenomenon has significant implications for asset allocation: In the context of increased volatility in the stock market and pressure on high-valuation sectors such as technology stocks, the hedging attributes and inflation protection functions of commodities continue to attract allocation capital inflows.

The firm emphasizes that this price support driven by investment demand has transcended short-term trading boundaries, becoming a medium-term pricing variable in the commodity market. However, this capital-driven upward trend also comes with corresponding risks. Its price foundation relies more on market sentiment and macro expectations; once risk appetite reverses or uncertainties ease, capital outflows may lead to a rapid correction of prices away from fundamentals