[Edmund Shing]: 

Hello and welcome to a new podcast from BNP Paribas Wealth Management. I am Edmund Shing, Chief Investment Officer. Today's podcast is taking a long view of commodities, and why we believe that they're still a very attractive asset class to hold for the long term. 

Let's start with the long view on commodities. Commodities are an interesting and unusual asset class. On the one hand, they're real assets, which have their purpose, but on the other hand, they give no income return, so they're very unlike stocks or bonds. There is no coupon or dividend to speak of in terms of income return. In the form of energy industrial materials, they are essential raw material inputs to the real economy and, of course, help growth.   Then we can talk about foodstuffs, which of course are essential to supporting life, and then finally precious metals, which act as long-term stores of value. So they all have different, distinct purposes. 

Commodity supply and demand are affected by both business and investment cycles on one hand, and seasonal factors on the other, notably, of course, the foodstuffs and natural gas relating to heating demand. But commodities are not a buy and hold investment, so quite unlike stocks and bonds in this respect. They have, on the one hand, been a very surprisingly decent investment over the very long term. From 1970 until 2026 the Bloomberg Commodity Spot Index has returned on average 6.8 percent per year in dollars, not as strong as stocks, but ahead of bonds. 

However, as I just said, unlike stocks and bonds or real estate, commodities are not a long-term buy and hold investment. Why not? Well, because there have been long periods when commodity indices have been range-bound, such as between 1980 and 2001, and again between 2011 and 2020. Now, during these periods, it had been best for investors to completely ignore commodities and focus elsewhere. 

However, when commodities are in a well-defined uptrend, such as between 1970 and 1980, the period of so-called stagflation, or 1999 to 2008, they can deliver outsized returns. So, in the latter case, 1999 to 2008, commodities in aggregate gained 470 percent over nine years, averaging a 26 percent return per year. Since the COVID pandemic lows of early 2020, commodities have now risen 160 percent, and this time have averaged a 17 percent annualized return over the six years to date. These super cycles have been underpinned by a key supply or demand factor. These have ranged from the 1973 Yom Kippur War and the 1979 Iranian Revolution, or the 2001 admission of China into the World Trade Organization. 

Looking at the situation for commodities today, we see a number of geopolitical constraints at play. The current uptrend has been supported by four key events so far in the last six years: the 2021 reopening of the global economy post-COVID lockdowns, then the 2022 outbreak of war in Ukraine, the 2025 imposition of widespread import tariffs by the U.S., and now in 2026, the closure of the Strait of Hormuz around Iran. 

This year, oil and gas have been the runaway commodity leaders, with a 58% return in dollars for the Bloomberg Energy Subindex to 24 April. But other commodity subindices, such as industrial metals plus 11%, and agriculture plus 7%, have also contributed to the 25 percent year-to-date return for the Bloomberg Commodities Index overall. Since March 2020, the strongest subgroup of commodities have been precious metals, up 223 percent  overall or 21 percent  annualized, led by strong global demand for gold. Now, are there further gains in view? Clearly, we've had a very strong 2026 so far after what has already been a very strong 2025 for commodities. 

But in spite of that, we do believe that there is further upside potential for certain commodities, such as strategic industrial metals, copper and aluminium, uranium in the energy space, and precious metals such as gold and silver over the next 12 months. Supply disruptions related to the closure of the Strait of Hormuz will persist even if the Strait were to reopen immediately. So, we don't expect oil and gas prices to fall back to pre-conflict levels anytime soon. 

Underlying factors such as historic underinvestment in new capacity, de-globalisation, rising emerging market and AI power consumption, decarbonisation, currency debasement, and investment and defense are all positive factors for commodity demand over the next few years. It is because of that, that we continue to advise investors to make allocation to commodities in a long-term diversified portfolio, as they will act as a very good hedge, particularly at times of elevated inflation. 

Thank you very much for listening to this podcast from BNP Paribas Wealth Management. Please like, share, subscribe to our weekly series of podcasts. For more information, please consult on the web, BNP Paribas Wealth Insights. Thank you and goodbye.