Gold and Commodities: Is the Bull Case Gaining Momentum?

The S&P 500 is finally approaching new all-time highs after a turbulent spring, driven by strong earnings and easing trade war tensions. And it’s not just domestic stocks rebounding; European markets are partying like it’s 1985 thanks to new accommodative monetary and fiscal policies.

The urge to dive headfirst back into the pool is strong, but investors still have plenty of uncertainty to grapple with in the months ahead. Warren Buffett says, “Be fearful when others are greedy,” and despite all the green currently on your screens, the case for owning gold and commodities remains strong.

Today, we’ll look at three reasons why owning gold and commodities makes sense in 2025 and three ways to add these assets to your portfolio.

Owning Gold to Combat Secular Trends

Gold has long been considered a safe-haven hedge against inflation. However, over the last two decades, it has also emerged as a systemic hedge against all types of economic risk, and investors (and institutions) have drastically increased their holdings since the pandemic. The spot price has surged by more than 43% over the last 12 months, with 23% of the increase occurring in the previous six months.

Gold and other commodities are ideal “chaos hedges” since they have no counterparty risk, and their value isn’t threatened by currency debasement or government spending.

Some secular shifts are underway that could keep interest rates and growth stagnant, strengthening the bull case for hard assets like gold.

• Rising U.S. Debt and Bond Yields – Current CBO estimates indicate that federal debt as a percentage of GDP will exceed 150% by 2055. Higher debt levels result in higher borrowing costs, which drive up the yields of Treasuries and make mortgages, car loans, and credit card rates more prohibitive to consumers. Rising government debt also creates a “crowding out” issue, as federal borrowing clashes with private capital demand, absorbing funds that the business sector would typically use.

• Fragmenting Supply Chains Amplifying Inflation – The COVID-19 pandemic highlighted how fragile supply chains can be, and isolationist policies will only exacerbate this fragility by rerouting companies from the most affordable and efficient sources. Tariffs and geopolitical instability could create a baseline of “sticky” inflation, making it difficult for central banks to return to their target. Additionally, global trade tensions often lead to supply shocks, which cause price volatility in commodities such as oil and agricultural products.

• Better Diversification Over the Traditional 60/40 Portfolio – Gold and commodities are often considered a trade rather than an investment, but the deglobalization paradigm shift is structural, not just a trend. In such an environment, stocks and bonds may not exhibit the correlation that investors have become accustomed to over the last several decades. In fact, since the bear market in U.S. stocks ended in late 2022, a portfolio of 60% stocks, 20% bonds, and 20% gold outperformed one with 60% stocks and 40% bonds. Additionally, replacing 20% of your bond holdings with gold and commodities lowered the beta of the portfolio in that timeframe, reducing volatility during drawdowns.

Three Ways to Add Gold and Commodities to Your Portfolio

Adding commodities like gold to your portfolio has never been easier. Unlike stocks and bonds, you’ll have the advantage of owning it physically, along with indirect or derivative ownership through stocks, ETFs, options, and futures contracts. However, be sure to select a sector or asset class that matches your risk tolerance and investment goals. If you’re trying to hedge against inflation, leveraging up with derivatives probably isn’t a sound strategy.

Physical Ownership

You might think the simplest way to add gold to your portfolio is to buy some bullion at your local Costco Wholesale Corp (NASDAQ:COST)., but owning physical gold comes with some unique downsides. If you own a substantial amount, you’ll need more than a safe in your attic to keep it secure, and storage comes with additional costs.

Plus, gains on physical gold and other precious metals are taxed as collectibles, not capital assets. The tax rate for collectibles is a flat 28%, which is higher than the 20% maximum long-term capital gains rate.

Stocks and ETFs

The easiest way to get exposure to gold and other commodities is actually through your brokerage. If you buy a gold fund like the SPDR Gold Shares (NYSE:GLD) ETF, you’ll outsource the tediousness of ownership and storage to an investment company. ETFs like GLD track the spot price of gold very closely, and you won’t be hit with the 28% collectibles rate when taxed on your long-term gains.

Other commodity-based ETFs, such as the U.S. Oil Fund and the Invesco DB Agriculture Fund, utilize futures contracts and cash instruments to achieve their objectives. In contrast, funds like the iShares S&P GSCI Commodities-Indexed Trust offer exposure to a broad basket of commodities.

Futures Contracts

You may recall that WTI crude oil briefly traded in negative territory during the COVID-19 pandemic. What actually happened was that the price of the May futures contract for a barrel of oil went negative, meaning that oil suppliers needed to pay their counterparties to receive delivery.

WTI crude has traded for around $60 per barrel for much of 2025, and traders can bet on the price of oil, gold, and other commodities through the futures market. Trading futures contracts is an advanced strategy that requires a margin account at a futures-specific brokerage and involves contracts that trade 24 hours a day, Monday through Friday.

But if you have the risk tolerance and understand how to navigate the futures markets, trading futures contracts can be a highly lucrative (if risky) endeavor.

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Written By: MarketBeat.com