"Bull market" in bulk commodities is not over yet? UBS: Crude oil, gold, copper, and aluminum all have "fundamental support"!

UBS Group's commodity analyst Giovanni Staunovo said that negotiations between the US and Iran remain the most important driving factor in the commodity market in the near term, and investing in commodities can help investors hedge against inflation and energy supply shocks in the medium term. In the latest report released on Monday, Staunovo pointed out that volatility in the commodity market may remain high in the short term, but these fluctuations have also brought significant returns to the overall market. As geopolitical risk premiums fade, the fundamentals of oil, gold, and industrial metals such as copper and aluminum appear to be supportive. UBS emphasized that in the medium to long term, commodities still have unique value in hedging against inflation, resisting energy supply shocks, and diversifying asset allocation. Staunovo wrote, "Oil product inventories in all countries are declining, and to suppress demand before inventory replenishment, oil prices may need to rise further. In the medium term, we expect gold prices to rise against the backdrop of increasing global debt burden, persistent US fiscal deficits, and continued trend towards reserve diversification." "We also expect further supply shortages in copper and aluminum, which will support prices in the medium term, while structural factors (such as electrification) will support long-term demand," he added. Staunovo also emphasized that UBS will continue to have a positive outlook on commodities in 2026, focusing on active management. "Commodities may experience periods of volatility, but they can also play an important role in portfolios, as historically they have low correlations with stocks and bonds," he wrote. In fact, as early as April 13, Staunovo had suggested that even long after the US-Iran war ended, commodities such as gold and oil could continue to generate excess returns. At that time, he advised investors with large gold positions to consider expanding their investment horizon and increasing exposure to other commodities. He wrote, "Ongoing tensions in Iran and risks in the Strait of Hormuz have brought upward pressure on commodity prices and volatility, especially in oil. We continue to be positive about commodities, primarily driven by fundamentals, supply-demand imbalances, and escalating geopolitical risks. Maintaining exposure to commodities and focusing on active management can help investors hedge against inflation and energy supply shocks," he wrote at that time. Staunovo pointed out that returns on commodities "may be strong" when there are supply-demand imbalances or when macro risks (such as inflation or geopolitical events) escalate. "For investors who favor gold, we believe that moderate allocation to gold can enhance diversification and mitigate systemic risks. For investors with a high gold allocation and significant unrealized profits, we believe that expanding the investment scope to copper, aluminum, and other commodities can help diversify future sources of returns," he added. Strong outlook on Gold Just last week, UBS lowered its year-end 2026 gold price forecast from $5,900 per ounce to $5,500, citing high US Treasury yields and continued strength of the US dollar as persistent negative factors. While UBS believes that the structural bull market in gold is not over yet, analysts Dominic Schnider and Wayne Gordon of the bank said that investors may need more patience in the face of these challenges. However, their forecast also indicates that by the end of the year, the price of gold can still rise by another $1,000. UBS has always viewed gold as a tool to hedge against the broader secondary effects of conflicts rather than to directly resist frontline war threats. The core function of gold is to isolate and defend against currency devaluation, soaring fiscal deficits, and macrofinancial risks triggered by geopolitical conflicts. UBS analysts also admitted, "In the short term, rising energy prices and inflation concerns have led to a stronger dollar and raised concerns about potential rate hikes - both of which are unfavorable for gold prices. But we expect central banks around the world to closely monitor inflation risks rather than rush to raise rates." Furthermore, the longer the delay in the US-Iran conflict, the greater the negative impact it will have on the macroeconomy, which in turn will continue to support hedging demand for gold. "In the long run, gold is an effective tool against inflation. According to the Global Investment Return Yearbook, since 1900, the real return on gold and commodities has been positively correlated with inflation," UBS stated. Finally, UBS also emphasized that structural trends will continue to support the attractiveness of gold, stating: We expect that high government debt levels, efforts by central banks and global investors to diversify investments, and reduce dependency on the dollar will support the long-term prospects of gold. Therefore, given the macroeconomic and political uncertainties outside of the US-Iran conflict, we still have a positive outlook on gold and believe that this precious metal remains an effective tool for portfolio diversification. Investors interested in gold may consider allocating up to "mid-single digits (around 5%)" of their assets to gold in a diversified portfolio. This article is reproduced from "Cai Lian Society", GMTEight editor: Jiang Yuanhua.