Gold’s historic rally isn’t just about precious metals. It’s part of a broader shift in how governments and investors are treating commodities, according to Goldman Sachs.
Central bank buying has helped drive gold’s surge in recent years as governments seek to hedge geopolitical and financial risks. Now, similar “insurance”-style strategies are emerging across other commodity markets, analysts at Goldman Sachs wrote in a note on Tuesday.
“As some of these risk-management policies have taken hold, some commodity markets appear to be transitioning — at least temporarily — from a single, global balance toward more regionally segmented systems, raising the risk of higher volatility,” they wrote.
That shift stems from recent supply shocks.
After 2020’s supply-chain disruptions and 2022’s food and energy shocks, policymakers focused on securing access to critical materials, Goldman’s analysts wrote.
That has included tariffs, export controls, support for domestic production, and the buildup of government stockpiles.
Together, those measures are reshaping commodity markets in ways that can make prices more sensitive to shocks.
Goldman pointed to copper as an early example. Despite expectations of a global oversupply in 2025, prices surged as US stockpiling pulled material out of international markets. That left markets outside the US, where global benchmark prices are largely set, tighter.
The dynamic isn’t limited to governments.
“Recent client feedback suggests that insurance-type demand for several commodities — not only gold but also industrial metals such as copper — has broadened beyond the public sector, as private sector investors turn to hard assets for diversification in an uncertain global policy environment,” the analysts wrote.
Those investor flows are supporting metals prices and amplifying volatility.
Gold is different
For most commodities, supply can adjust when prices rise. Producers often ramp up output, helping cool price spikes driven by “insurance” demand.
But policies aimed at making supply more secure can also encourage overproduction. That can push prices lower, drive out smaller producers, and leave supply more concentrated, increasing the risk of future disruptions and sharp price swings.
Gold, however, remains structurally different.
Nearly all the gold ever mined still exists above ground, and annual supply is relatively stable and slow to respond to price moves, the Goldman analysts wrote. That means demand driven by risk concerns can keep pushing gold prices higher for longer.
Spot gold was trading around $5,500 per troy ounce early Wednesday. Prices are up about 16% this year amid volatile trading.
Gold hit a record high above $5,500 per ounce on January 29 before plunging a day later, with the yellow metal falling more than 10% to below $5,000 per ounce.