To download the Auspice June Blog as a PDF, click here.
This commentary is intended for general informational purposes only and does not constitute investment advice or a recommendation.
This month's blog will highlight the "Auspice Commodity Investor's Guide - The Case for Active Commodities" (CIG) we published June 10th, alongside some recent related data points we have observed regarding commodities.
The CIG was created to address two of the main topics of conversation we find ourselves having with anyone looking at the commodity space - the structural case for commodities and the empirical case for active commodity exposure management. The foundation is simple. We believe commodities are a third source of return, independent of equities and fixed income, that have historically improved portfolio diversification, drawdowns, and risk-adjusted returns.
The CIG lifts the hood on the differences in how investors choose to gain access to their exposure, highlighting that passive commodity approaches or Gold alone often disappoint over time and where the active edge exists. It also explains how physical commodities not only differ from stocks and bonds, but also where resource equities fall short as a proxy, and what that shortfall means with respect to portfolio diversification across business cycles. Underlying all of this is the real connection between commodities and inflation: they are a source of it, not a reaction to it.
Lastly, we explore the difference between a commodity cycle and a supercycle, why we could be in the latter, and a new emerging demand shock, alongside what institutional investors are doing to position for it. Best part? You can too!
Gold:
We have said for many years that Gold is the most complex of commodities. Is it a commodity? A currency? A store of value? Likely all three. But what it is not is a great inflation hedge. There is no statistical evidence of that.
The CIG deals with this common misnomer in the financial community, both retail and institutional alike. Quite simply, Gold continues to disappoint if its intended purpose is to hedge inflation. It did not show up in 2020-2022 as CPI went to 9.1% from nothing. "During the early-2021 to mid-2022 inflation surge, US YoY CPI peaked at 9.1%. Virtually every conventional hedge disappointed. Gold lost 9.2% in absolute terms, with a real return of roughly -21%”. Again, here in 2026, as the Iran/Israel/US war hit and the Strait of Hormuz exacerbated commodity prices, Gold did not show up. It has been in steady decline since the beginning of the year, down 9%, and is off over 25% since peaking on Jan 29th.
The evidence and subsequent conclusion suggests Gold has an inconsistent relationship with inflation over shorter time horizons. It is a statistical diversifier but not a reliable inflation hedge. While Gold has experienced significant rallies in recent years, they came as we dis-inflated from 9.1% towards the 3% 100-year average, not as inflation rose. The irony is that gold is often bought as a diversifier and an inflation hedge, yet a concentrated, single-asset position delivers neither reliably: it adds idiosyncratic risk, and its link to inflation is inconsistent at best.
Our conclusion in the guide is that broad commodity exposure avoids that concentration and has historically shown consistent positive beta to inflation across multiple sectors.
Current Risk:
While broad exposure is optimal, there is a distinct risk in how many investors actually access the asset class: commodity beta indices such as the Bloomberg Commodity Index (BCOM) or related products like ETFs that are simply replicas with high correlation. Despite looking diversified on the surface, the risk is concentration.
How risky are the long-only commodity beta indices and related ETFs? Per the recent Apollo paper, aptly titled “Commodity prices are moving higher” (p6/7) the S&P GSCI has a 61% energy weight1. BCOM has a 29% weight. That is a significant concentration. These indices are "production" weighted and rebalanced annually. This ignores price and event risk.
Per our recently published interview in the Globe and Mail, "… passive exposure through commodity indexes can be risky, as some indexes react brilliantly to an event like Iran and the Strait of Hormuz, but then drop violently.” He says ”… the commodity sleeve in a portfolio requires active management."
Yet what about other commodities? Non-energy prices remain elevated, now above the 2011 highs while below 2008 highs.
A Reminder:
Oil does not define all commodities, nor does Gold, or any other single market or even commodity sub-sector. As such, recent gains in commodity beta products and related ETFs should be viewed with caution.
The opportunity we see in commodities is broad, and commodity prices are moving higher across the board, but for different reasons in each segment. For example, the Middle East impacts energy and fertilizer. Data center buildout impacts base metals. Market risk and reality of inflation drives safe-haven demand for precious metals.
We believe the most responsible way to gain exposure is broadly across commodities, diversified by risk , not production weighting or holding a highly correlated/high-beta investment product that does not incorporate active risk management or a systematic trend-following investment process.
Using an active, rules-based approach addresses that structural weakness directly. Rather than holding full exposure regardless of market conditions, a systematic trend-following strategy can reduce risk or exit when commodity trends turn negative – reducing drawdown risk without requiring investors and advisors to time the market. The difference is not about forecasting; it is about having a mechanism to step aside.
For example, as the price and volatility of crude exploded higher at the end of February, Auspice took profits and reduced the risk for the next couple of months, such that when the price started falling in May (and continued in June), we limited the downside. Prior to this, we did the same with Silver in late 2025 and early 2026.
We call it commodities with airbags.
SOURCES
https://www.apollo.com/content/dam/apolloaem/pdf/daily-spark/2026/jun/15/061526-Commodity%20prices_v2.pdf?utm_medium=email&utm_source=pardot&utm_id=7136d200df7e09473afe6be1b9ef53bd&utm_campaign=EXT_Daily+Spark&utm_content=body-textlink-dailyspark-here
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