Whalesbook
Commodities Surge on De-Dollarization and Geopolitics
Commodity prices are climbing not just due to typical market cycles, but a significant structural shift. Analysts see a deliberate move by nations away from the US dollar as the main driver, marking the start of a new commodity supercycle. This strategy, gaining pace since 2022, sees major economies diversifying their reserves and rethinking the dollar's role in global trade, changing market forces. Geopolitical conflicts have intensified these trends, causing major disruptions to energy and metals supply chains. These combined factors have driven prices for key commodities like oil and aluminium to multi-year highs, moving beyond immediate supply and demand.
De-Dollarization and Geopolitics Drive Price Rises
The story behind commodity prices has clearly changed. The era where prices were dictated solely by supply and demand fundamentals is over. A structural de-dollarization trend is now the main driver. Countries are actively searching for alternatives to the US dollar for trade and reserves, a shift sped up by geopolitical instability and concerns about sanctions. This is seen in the growing use of contracts not priced in dollars for energy and other goods. At the same time, increased geopolitical tensions have added significant risk premiums. These events have directly disrupted supply chains, causing price jumps in crude oil (up 4.85% for WTI on April 9, 2026, reaching $98.99/bbl) and major disruptions to LNG and aluminium output. Aluminium prices, for example, have hit multi-year highs without a matching rise in underlying demand. Roughly 17-18% of global LNG supply and about 9% of aluminium production have been impacted by these disruptions.
Gold Shines as Central Banks Buy and US Debt Grows
Gold is a major winner from this changing landscape. Its price increase is supported by strong buying from central banks, not by hopes for lower interest rates. Central banks worldwide have rapidly increased their gold holdings to diversify away from the weakening US dollar. In 2025, they bought about 850 tonnes, the third-highest amount on record, with China and India leading the way. This strategic buying is driven by a need for economic independence and less reliance on US monetary policy and sanctions. Moreover, the rising US national debt, expected to reach $38.1 trillion by late 2024, is a significant boost for gold. History shows that growing debt and fears of currency devaluation often increase demand for gold as protection against inflation and financial instability. The total market value of gold is an impressive $17.9 trillion as of October 2024.
Metals Look Stronger Than Volatile Energy
While energy markets are expected to stay volatile and reactive to headlines due to ongoing geopolitical events, metals are becoming a favored investment area within commodities. Copper and aluminium, specifically, are predicted to show sustained strength. This is supported by ongoing supply shortages and new demand from expanding data centers and major power infrastructure projects. The global market for commodity services, including trading, storage, and transport, is also set for growth, projected to reach $8.16 billion by 2034, with metals expected to see the fastest expansion.
Risks and Challenges in the Commodity Outlook
Despite the positive outlook for commodities, significant risks remain. De-dollarization, while picking up speed, still faces obstacles. The US dollar possesses strong advantages, such as deep and liquid capital markets and established network effects, making it hard for other currencies to fully replace it in global finance and trade. Current geopolitical conflicts, while driving up commodity prices now, carry the risk of easing, which could lead to sharp price drops. Additionally, persistently high energy prices threaten global economic growth, especially in energy-importing areas like Europe. A sustained 20-30% oil price hike there could boost inflation by around 1.5-2.5 percentage points and cut GDP growth by about 0.5-0.75 percentage point. The ongoing purchases of gold by central banks, motivated by diversification, could also slow if real interest rates rise sharply, making gold less attractive compared to assets that offer yields. The idea of a commodity supercycle, while supported by structural demand changes, might also face the common pattern of over-investment leading to future supply gluts, as seen before. Furthermore, the intricate connection between fiscal policy, monetary support, and inflation means central banks face a tough balancing act; tightening policy to fight inflation could worsen economic slowdowns.
Outlook for Commodities
Looking forward, commodity markets are expected to follow their current path, influenced by geopolitical events. Short-term stabilization might occur as markets near cycle highs. However, the underlying demand for metals like copper and aluminium, driven by technological shifts and infrastructure projects, should provide a stable base. Central banks are expected to continue strong demand for gold, with projections showing ongoing purchases through 2026. While energy markets will likely remain sensitive to news, the strategic role of metals in the changing global trade landscape positions them as a favored investment.