UBS forecasts long-term bull cycle in global commodity markets

UBS has identified the emergence of a long-term, structural bull cycle in global commodity markets. Key drivers for this upward trend include electrification, investments in artificial intelligence infrastructure, rising electricity demand, supply constraints, and years of insufficient investment.

Strategist Sagar Khandelwal suggests that commodities can serve as a vital tool for portfolio protection, particularly when high inflation expectations pressure stocks and bonds. He recommends maintaining diversified positions across precious metals, energy, industrial metals, and agricultural products.

Regarding gold, UBS maintains a positive 12-month outlook. This optimism is supported by easing inflation concerns in the US, declining expectations for near-term interest rate hikes by the Federal Reserve, central bank demand, and a global trend toward diversifying away from the US dollar.

In the energy sector, uncertainty stemming from tensions between the US and Iran remains a critical risk factor. The bank noted that difficulties in reaching agreements and limited crude oil supply create volatility regarding production normalization and shipment stability.