Investing in commodities: An introduction
There are also commodities such as gold, silver and precious metals that may have both industrial uses and act as a store of value. Commodities can fulfil a range of options in a portfolio – from inflation protection to generating income, to adding spice to a portfolio at times of economic growth.
Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.
Why now to invest in commodities?
Commodities, and the companies that mine and distribute them, are a vital part of the global economy. Technology cannot run without the commodities that create the hardware, or the energy to power it. Geopolitical tension and long-term structural change are also driving demand for specific commodities.
Defence against higher inflation - There are still inflationary pressures in the global economy, from US tariffs, to rising food prices, and rising wages. Commodities have historically provided a hedge against inflation.2
Favourable supply and demand dynamics - Demand is high, both from industrial uses, long-term phenomenon and the growth of AI, while commodity supply is curtailed.3
Protection against geopolitical shifts – Difficult geopolitics and resource nationalism can disrupt the global distribution of critical natural resources, pushing up prices.4 Equally, gold and other precious metals can become a ‘safe haven’ at times of economic disruption.5
Commodities investing: Key drivers and risks
Every commodities market has its own supply and demand dynamics. Agricultural commodities are vulnerable to global climate conditions, for example, while metals prices will rely on the industrial cycle. The transition to low carbon energy solutions is also creating demand for specific commodities such as copper. Nevertheless, there are certain environments that favour commodity investment.
When global economic growth is high
Commodities tend to do well at times of economic expansion. Businesses and individuals have the confidence to spend and invest more. This creates greater demand for commodities, particularly ‘building block’ commodities such as metals, cement and energy.1
Inflation and interest rates
Commodities prices have historically shown some correlation with inflation and interest rates. Commodities are an important part of the inflation basket for most countries and commodity prices will often rise in line with inflation.2
When supply is disrupted
Supply can be disrupted by a variety of factors. This may be specific to the companies themselves – not investing in new supply, for example – or caused by global shocks, such as the Covid pandemic.
Geopolitical tensions
When countries are in dispute, it can often prompt protectionism over key commodities. This has been seen more recently with the dispute over China’s supply of rare earths, but has also been seen historically over oil.6 Geopolitical shocks can also hit supply, as has been seen with agricultural commodities and gas during the Ukraine crisis.
Major market indices
There are indices that measure the performance of commodities and commodity derivatives, but most investment managers will measure performance against indices that track the performance of mining companies. These may be diverse mining companies, or specific to certain commodities, such as gold miners.
S&P GSCI – The index gives exposure to a basket of commodities prices. It is a benchmark for investment in the commodity markets and as a measure of commodity performance over time.7
MSCI ACWI Metals & Mining - The MSCI ACWI Metals and Mining Index is composed of large and mid cap mining companies across 23 developed markets countries and 24 emerging markets countries.8
MSCI ACWI Select Gold Miners – The index focuses on companies in the gold mining industry that are sensitive to the underlying price of gold. This includes companies primarily engaged in gold mining or that derive a majority of their revenues from gold mining and do not hedge their exposure to underlying gold prices.9
International markets - There are certain regional markets that have more exposure to commodities. Latin America, for example, is dominated by large natural resource companies. Energy and materials companies make up over a quarter of the MSCI Latin American index.10 Mining companies are also an important part of the South African market.11
When should I invest in commodities?
Commodities have different return profiles. Gold, for example, is often seen as a safe haven asset, while iron ore is more dependent on economic activity. However, there are certain circumstances that tend to be broadly supportive for commodities.
When inflation is higher
Commodities are ‘real’ assets and often form part of inflation indices. They have historically risen in line with inflation. They rallied in the aftermath of the pandemic, for example, as stimulus and supply bottlenecks fuelled inflation.12
During periods of economic growth
As economic growth accelerates, companies will often invest in plants and machinery to meet anticipated demand. This creates greater demand for industrial commodities such as iron ore, aluminium or nickel, and power commodities, such as oil, gas and copper.
At times of geopolitical tension
Geopolitical problems can disrupt the supply of goods around the world, creating bottlenecks and pushing up prices. The most recent example was during the Ukrainian war, which created supply shocks in oil, gas, wheat and fertilizer.13
At times of currency weakness
For gold and other commodities that act as store of value when major currencies show weakness, the price may also respond to falling interest rates. They have a low or negative yield, so do better when the opportunity cost is lower. Gold also tends to do well when the US Dollar is weaker or there are concerns about the sustainability of US economic policy.14
What are the best commodities to invest in?
Industrial metals - Industrial metals include iron ore and steel, but also lithium, copper and lead. Performance is often related to the economic cycle, and governments’ willingness to spend on critical infrastructure to support economic development.15
Precious metals – Precious metals such as gold, silver and platinum are often seen as a safe haven at times of crisis, or when there are concerns over government borrowing or currency debasement.5 However, some precious metals also have important industrial uses, such as the use of silver in solar panels, or platinum in catalytic converters.
Soft commodities - Soft commodities are grown or cultivated, and include wheat, sugar, coffee or livestock, alongside cotton, palm oil and wool. Prices will be dependent on global demand, but are also influenced by weather events and factors that disrupt production, such as the availability of fertiliser.
Energy - Energy commodities include natural gas, electricity and wind power, with oil the largest market. Prices are influenced by global economic growth and demand for energy, but also by geopolitical considerations.
Commodity investment: Historic performance
MSCI World Metals and Mining Index
Commodities are influenced by a range of geopolitical factors, which can see prices move significantly over short periods. For example, from the early 2000s to 2014, China’s industrialisation drove huge demand for commodities. The subsequent adjustment to more normal demand patterns saw weakness in commodity prices.16
Commodities had a difficult year in 2024, trailing global stock markets. 2025 has been a far stronger year, driven by a resurgence in China.8 Gold has had its own performance trajectory. It has recently hit new highs as investors have searched for a ‘safe haven’ in response to volatile equity and bond markets.17
Annual performance to last quarter end (%) (GBP)
|
30/09/2024 |
30/09/2023 |
30/09/2022 |
30/09/2021 |
30/09/2020 |
|
|
Price |
21.44 |
5.36 |
17.68 |
8.69 |
36.88 |
|
NAV |
14.67 |
5.97 |
14.35 |
7.67 |
46.68 |
|
Sector Price+ |
32.79 |
6.75 |
6.91 |
-7.38 |
33.51 |
|
Sector NAV+ |
21.10 |
13.58 |
1.33 |
-8.13 |
29.07 |
|
Reference Index‡ |
10.22 |
5.29 |
-3.95 |
11.98 |
22.05 |
† Morningstar IT Global Emerging Markets
‡ MSCI Frontier + Emerging Markets ex Selected Countries Index
The figures shown relate to past performance. Past performance is not a reliable indicator of current or future results and should not be the sole factor of consideration when selecting a product or strategy.
Index performance returns do not reflect any management fees, transaction costs or expenses. Indices are unmanaged and one cannot invest directly in an index.
Our Investment Trusts
Regional Hub: Commodities FAQs
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Commodity and natural resources companies can have a number of roles within a portfolio: they can provide a hedge against inflation, with commodity prices often rising at times of higher economic activity. They may also provide diversification, with lower correlation to broader stock markets.
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Commodity and natural resources companies will tend to do well when commodity prices are high. Commodity prices often increase when global economic activity is high and there is greater demand for natural resources. Commodities prices may also rise at times of significant geopolitical tension: if countries are in dispute, it can prompt protectionism over key commodities. It may also disrupt supply, which can push up prices.
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Multiple factors can affect the price of commodities – from geopolitics to monetary policy, from natural disasters to economic growth. This can create volatility. Every commodities market has its own supply and demand dynamics. Agricultural commodities are vulnerable to global climate conditions, for example, while metals prices will rely on the industrial cycle.
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The BlackRock Energy and Resources Investment Trust (BERI) aims to provide long-term total returns to shareholders through a combination of capital growth and income by investing in the mining and energy sectors. It invests in both traditional and renewable energy sources.18
The BlackRock World Mining trust (BRWM) invests across the mining sector, aiming to benefit from long-term trends such as digital transformation, and changing energy markets. Targeting income and capital growth, the trust provides a diversified blend of companies designed to benefit from the changing global economy.19
Our range
Source:
1 Federal Reserve - Commodity terms of trade uncertainty and economic activity in emerging economies - 7 July 2025
2 Investopedia - Commodities: The Portfolio Hedge - 27 May 2025
3 UN Trade and Development - Ministers urge global partnership to make critical minerals work for development - 22 October 2025
4 DWS - Critical minerals at the center of geopolitical tensions - 16 June 2025
5 LSEG - Gold in a fragmented world: Safe haven and strategic asset - 28 April 2025
6 BBC - Why the US needs China's rare earths - 17 April 2025
7 S&P Global - SP GSCI index - 31 October 2025
8 MSCI - MSCI World Metals & Mining - 31 October 2025
9 MSCI - ACWI Select Gold Miners - 31 October 2025
10 MSCI - MSCI EM Latin America index - 31 October 2025
11 MSCI - MSCI South Africa index - 31 October 2025
12 US international trade commission - The 2021 Commodity Price Surge: Causes and Impacts on Trade Flows - 21 February 2022
13 European Council of the European Union - How the Russian invasion of Ukraine has further aggravated the global food crisis - 31 January 2025
14 LSEG - Gold’s strategic revival in a fragmented world: A modern portfolio component - 6 May 2025
15 Goldman Sachs - Which commodities are the best hedge for inflation? - 26 June 2024
16 AFR - The China commodities super-cycle is over. Will there be another boom? - 16 January 2025
17 Goldprice.org - Gold Price - 25 November 2025
18 BlackRock - BlackRock Energy and Resources Income Trust plc - 25 November 2025
19 BlackRock - BlackRock World Mining Trust plc - 25 November 2025
Risk Warnings
Investors should refer to the prospectus or offering documentation for the funds full list of risks.
Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.
Past performance is not a reliable indicator of current or future results and should not be the sole factor of consideration when selecting a product or strategy.
Changes in the rates of exchange between currencies may cause the value of investments to diminish or increase. Fluctuation may be particularly marked in the case of a higher volatility fund and the value of an investment may fall suddenly and substantially. Levels and basis of taxation may change from time to time and depend on personal individual circumstances.
Fund-specific risks
BlackRock Energy and Resources Income Trust plc
Counterparty Risk, Currency Risk, Emerging Markets, Gearing Risk, Investments in Mining Securities
BlackRock World Mining Trust plc
Counterparty Risk, Currency Risk, Emerging Markets, Gearing Risk, Gold / Mining Funds
Description of Fund Risks
Counterparty Risk: The insolvency of any institutions providing services such as safekeeping of assets or acting as counterparty to derivatives or other instruments, may expose the Fund to financial loss.
Currency Risk: The Fund invests in other currencies. Changes in exchange rates will therefore affect the value of the investment.
Emerging Markets: Emerging markets are generally more sensitive to economic and political conditions than developed markets. Other factors include greater 'Liquidity Risk', restrictions on investment or transfer of assets and failed/delayed delivery of securities or payments to the Fund.
Gearing Risk: Investment strategies, such as borrowing, used by the Trust can result in even larger losses suffered when the value of the underlying investments fall.
Gold / Mining Funds: Mining shares typically experience above average volatility when compared to other investments. Trends which occur within the general equity market may not be mirrored within mining securities.
Investments in Mining Securities: Investments in mining securities are subject to sector-specific risks which include environmental concerns, government policy, supply concerns and taxation. The variation in returns from mining securities is typically above average compared to other equity securities.
