Goldman Sachs: Commodities Enter “High Volatility Era” Due to Hoarding — Gold's Rally Likely More Resilient

Goldman Sachs believes the historic surge in gold prices is not just a precious metals phenomenon — it is part of a broader shift in how governments and investors approach commodities.

 

Central bank buying has recently propelled gold higher, as governments seek to hedge geopolitical and financial risks.

 

In a Tuesday (February 10) report, Goldman Sachs analysts wrote that similar “insurance-style” strategies are now emerging in other commodity markets.

 

“As some risk-management policies take effect, certain commodity markets are shifting from a single global supply-demand balance toward more regionally segmented systems — raising the risk of intensified price volatility.”

 

Goldman analysts noted that after the 2020 supply chain disruptions and the 2022 food and energy crises, policymakers began prioritizing secure access to critical materials.

 

Corresponding measures include tariffs, export controls, support for domestic production, and building government strategic reserves. Together, these have reshaped commodity market structures, making prices more sensitive to shocks.

 

Using copper as an example, Goldman highlighted that while the market originally expected global copper supply surplus in 2025, U.S. stockpiling has diverted some supply from international markets. This has tightened conditions in markets outside the U.S. — where global benchmark prices are primarily formed.

 

This phenomenon is not limited to governments. Analysts wrote: “Recent client feedback shows ‘insurance-type’ demand for various commodities — not just gold, but also industrial metals like copper — has expanded from the public sector to corporates, as private-sector investors turn to physical assets for diversification amid global policy uncertainty.”

 

These inflows are supporting metal prices and amplifying volatility. For most commodities, rising prices prompt supply adjustments — producers often ramp output to ease “insurance-driven” price spikes.

 

But policies aimed at enhancing supply security can also lead to overproduction, depressing prices, squeezing out smaller producers, and concentrating supply — paradoxically increasing future disruption and sharp price volatility risks.

 

Gold, however, is structurally different. Goldman analysts pointed out that nearly all gold ever mined still exists above ground, with annual new supply relatively stable and slow to respond to price changes.

 

This means demand driven by risk concerns can sustain higher gold prices over longer periods. In European trading Wednesday, spot gold traded around $5,054/oz. Year-to-date, gold has risen 17% amid sharp volatility.