Goldman Sachs warns of new era of high commodity volatility
Goldman Sachs has cautioned that global commodity markets have entered what it describes as an “era of high volatility,” driven by governments building strategic stockpiles that are fragmenting a once integrated global system and making prices more sensitive to disruptions.
In a report published on February 10, the investment bank said insurance style demand that central banks have long applied to gold is now extending to industrial metals. Countries are increasingly prioritizing supply security over market efficiency, marking what the bank characterized as a structural shift in how commodities are managed and valued.
Lina Thomas, a commodities analyst at Goldman Sachs, wrote that markets are moving away from a single global balance between supply and demand toward a more regionally fragmented system. For decades, supply disruptions in one part of the world could be offset by surpluses elsewhere, effectively pooling inventories at a global level. That shock absorbing mechanism is weakening as governments build national reserves and restructure supply chains along regional lines.
Copper illustrates the trend. Even amid forecasts of global oversupply, stockpiling behavior has tightened availability in major trading hubs, supporting prices. Silver has shown an even sharper reaction. Goldman Sachs estimates that a net weekly demand of 1,000 tonnes typically lifts silver prices by about 2 percent. With inventories in London at low levels, that price sensitivity has climbed to roughly 7 percent, underscoring thinner buffers in key markets.
The bank’s report suggests that volatility in commodities may no longer be cyclical but structural, reflecting lasting changes in how supply and demand imbalances are absorbed.
Recent US policy offers a concrete example. The Trump administration’s newly launched “Project Vault,” officially announced on February 3, aims to create strategic reserves covering around 60 days of critical minerals, including rare earths, copper and lithium. The $12 billion initiative is designed to shield US manufacturers from supply shocks.
More than a dozen companies, including General Motors, Boeing and Alphabet’s Google, have committed to participate. The reserve draws on the model of the Strategic Petroleum Reserve and will be financed with $10 billion from the Export Import Bank, alongside $2 billion in private sector contributions.
Goldman Sachs maintains a bullish outlook on gold. The bank forecasts that prices could reach $5,400 per ounce by the end of the year, with risks tilted to the upside. It recently raised its December 2026 target from $4,900, citing continued diversification by private investors and emerging market central banks using gold as a hedge against geopolitical and financial risks.
Unlike many other commodities, gold supply is structurally inelastic. Annual mine output responds only marginally to price fluctuations, allowing sustained demand driven by risk management and reserve diversification to exert prolonged upward pressure rather than short lived spikes.
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