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

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Against the backdrop of heightened global stock market volatility, investors are accelerating the shift of funds from financial assets to hard assets like commodities in search of safe havens. According to the Goldman Sachs commodities research team, this "hard asset rotation" may keep prices of various metals high for an extended period, even exceeding the levels supported by fundamental physical supply and demand.

Goldman Sachs analysts indicate that client conversations show that, driven by rising macro and geopolitical risks, investors' willingness to diversify and allocate to hard assets has become the key driving force behind this commodity rally. Hard assets generally refer to commodities, real estate, infrastructure, and other tangible physical assets, whose value-preserving properties in inflationary and uncertain environments are attracting capital away from traditional financial assets like stocks and bonds.

Research points out that precious metals and copper have greater upside potential in this round of rotation than oil and natural gas. Goldman Sachs maintains its target price for gold at $5,400/oz for December 2026, and believes the private sector’s demand for diversification could provide upward momentum. Copper prices likewise benefit from hard asset rotation and strategic reserve demand, laying the foundation for price increases.

Following the metals market rebound in 2025, most commodities continued their strong and volatile performance in early 2026. Goldman Sachs analysis suggests that ongoing asset allocation adjustments by investors could keep prices of some metals (such as copper) elevated for the long term, resulting in structural premiums.

Price Driving Mechanism of Hard Asset Rotation

Goldman Sachs research points out that during asset allocation rotates toward hard assets, investor positioning is closely linked to commodity prices. Due to the relatively small scale of commodity markets, capital inflows can significantly drive up prices in the short term.

The firm's analysis suggests that precious metals and copper have greater price upside potential than oil and natural gas in this round of allocation shift, mainly due to three structural factors: First, market depth differences. The metal markets are much smaller than the energy markets, so the marginal impact on price is much greater for equivalent capital inflows.

Second, supply elasticity is different. Rising energy prices may quickly stimulate shale oil supply, while copper mines are constrained by long-cycle projects, and precious metals supply is even more rigid.

Finally, storage and roll costs. Energy storage capacity is relatively limited, and futures roll costs can rise sharply; metals are easier to store, and physically-backed precious metals ETFs may not even involve roll costs, which is more conducive for long-term capital allocation.

Specific Impacts on Gold, Copper, and Oil

Goldman Sachs' quantitative models indicate that the current rotation into hard assets is exerting differentiated driving effects on the prices of various commodities. Specifically, capital inflows exhibit pronounced structural differences in price sensitivity among gold, copper, and oil.

Regarding gold, model calculations show that for every 1 basis point (i.e. 0.01%) increase in the proportion of gold in U.S. financial portfolios, the gold price will rise by about 1.5%. Based on this, Goldman Sachs believes the continuing private sector demand for diversified allocation could pose upside risk to the firm's $5,400/oz December 2026 gold price target.

The copper market is equally sensitive to capital flows. A 1 standard deviation increase (about 10 percentage points) in net managed money as a share of open interest can boost copper prices by about 6.9% in the short term. However, as time progresses (for example, after one year), due to increased scrap copper supply and potentially weaker demand, this effect diminishes to about 4.2%. Goldman Sachs notes that continued hard asset rotation and strategic stockpiling may together create upside risks for copper price forecasts.

By comparison, the oil market is more flexible in the short term to fund flows. Every 1 standard deviation increase (about 2.7 percentage points) in net managed money share can push oil prices up by approximately 10% in the short term, with gains falling to 7.5% after one year. Goldman Sachs emphasizes that hard asset rotation combined with supply interruption risks stemming from geopolitics may further lift oil price forecasts.

Market Outlook: "Staying Higher for Longer"

Goldman Sachs analysis points out that the current global rotation of capital into commodities and other hard assets may keep prices of some metals, like copper, above levels dictated solely by physical supply and demand for the long term, resulting in a structural premium. This phenomenon is highly instructive for asset allocation: as stock market volatility intensifies and high-valuation sectors such as technology stocks come under pressure, the hedging and inflation-protection features of commodities continue to attract allocation of funds.

The firm stresses that this price support driven by investment demand has gone beyond the realm of short-term trading, becoming a medium-term variable for commodity market pricing. However, this capital-driven uptrend also comes with corresponding risks. The price basis relies more on market sentiment and macro expectations; if risk appetite reverses or uncertainty eases, capital outflows could cause a rapid correction in prices, deviating from fundamentals.

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