A golden rise and a silver lining for commodities

This article was written by Jim Wiederhold, Commodity Indices Product Manager at Bloomberg.

In 2025, Gold had its best start to a year in five decades. Uncertainty around trade policy, US Dollar devaluation, equity markets fragility, demand for safe havens, and the general need for a store of value have all contributed to gold making new highs. Gold still holds the pole position as the most popular safe haven and store of value today just like it has for nearly three thousand years of trading history. There is reason to believe gold prices could continue higher because this has been seen historically as has been discussed by Bloomberg’s macro strategist Simon White. This last leg higher in gold prices has been driven by retail investors and can be seen by the record assets under management of all physically backed gold ETFs at $348bn as of 24^th April 2025.

If gold finally loses momentum after spending much of 2025 in overbought territory, market participants seeking broader commodities exposure might consider the diversified mix of commodities in the Bloomberg Commodity Index (BCOM) or the Bloomberg Enhanced Roll Yield (BERY) Index. Since 1975, there were about 250 incidents where spot gold prices made new all-time highs and the average performance for the BCOM total return index after each gold high was +5% after one quarter and +14% over the next year. Exhibit 1 shows the periods where new highs in gold tend to cluster over roughly two-year periods followed by years (sometimes decades) of consolidation before gold rises again. This time around, we’ve had a year and a half of consistent new highs in gold.

Gold was historically looked to as a hedge for inflation but over recent years, gold and precious metals tended to demonstrate very low inflation betas to changes in inflation compared to sectors like energy. A broad-based commodities exposure has demonstrated more sensitivity to changes in inflation than precious metals due to the inclusion of energy and industrial metals commodities. We’ve discussed the inflation hedging aspects of commodity indices in recent blogs. Compared to other safe havens, Exhibit 2 shows gold has outperformed the Japanese Yen and Swiss Franc which are both up about 10% this year. Fixed Income is slightly positive on the year. If this year-to-date performance stands, 2025 would be one of the best years for gold since the 1970s. During the Great Financial Crisis gold rose 31% and during the first year of the COVID pandemic we saw gold rise 25%, still trailing this year’s 26%. Although, a pullback in gold prices may be in order after the volatile move higher.

Gold is overbought according to the 14-day relative strength indicator (RSI) and potentially over owned as central banks have stockpiled bullion over the last year and most recently, retail investors bought physical backed gold ETFs. While most have been buying, there is one segment of gold investors who appeared to have been reducing exposure since the middle of the last quarter. These are futures holders of gold who had long positions near all-time highs to start the year but have potentially taken profit as the gold price rose recently. With equity markets fragile, these sophisticated futures investors may be broadening out their exposure from gold to the diversified exposure seen in BCOM or BERY. There has been an increase in trading volumes of BCOM futures as well as the newly launched sector futures with the first trade in BCOM Energy coming less than a month after launch.

Market participants sometimes look to silver as the next mover after gold moves higher with velocity and for good reason. Exhibit 3 shows the average quarterly performance over the last 10 years for gold and silver. Gold most recently had its best quarter over the last decade rising 19% in 1Q 2025. The first quarter tends to be the best quarter for gold performance rising an average of 4% over the last decade. Silver tends to lag with the second quarter being its best rising on average 4% following gold.

While future performance cannot be predicted, historical patterns show that silver has sometimes lagged gold and then performed positively. Therefore, silver could be the next commodity to rise higher this year if market participants roll exposure from gold to the less precious metal. Macro hedge funds trade directional strategies and likely were long gold exposure on the ride higher. Exhibit 4 shows the CFTC net gold futures positioning was neutral in the last quarter of 2023 but since then steadily rose to close the most net long gold in the 20-year history of futures positioning data by the end of 2024. In 2025, the net long gold positioning has come off substantially as some participants could have taken profit while silver positioning is not as long despite several years in a row of a supply deficit.

Attempting to pinpoint one commodity like silver as a replacement to Gold allocations could be difficult because more than half of silver demand is driven by industrial and renewable use. Silver is also one of the more volatile commodities so holding a smaller portion via BCOM or BERY, with current weights around 4-5%, could help with risk adjusted returns. Diversified commodities indices provide a more broad-based and balanced exposure and possibly improve returns as there is potential for pullbacks after gold has made new highs quickly. In this volatile environment, market participants may take profit where they can. While the most precious metal has had a golden rise to start 2025, rotating into a broad commodities exposure may give market participants a silver lining and help navigate potential future instability over the rest of the year.