GoldFixPM: Goldman Remains Long Gold and Oil
Citing Tariff risk as key
Jan 31, 2025
∙ Paid
Long gold and oil remain a hedge against tail-risk scenarios. Following
President Trump’s inauguration and initial executive orders, policy uncertainty
remains elevated. This reinforces the diversifying role of commodities in
investment portfolios. In particular, we continue to see value in long gold and oil
long positions as a hedge against several tail risks, such as tariff escalation
(gold), geopolitical oil supply disruptions (oil), and debt fears (gold) - though some
hedging length in gold is now priced into the market.
Commodity markets signal high risks of US tariffs on aluminum, copper
and Canadian oil. Regional pricing differentials across commodity markets help
us gauge the market-implied probability of tariff implementation. This currently
signals an approximately 85%/50%/30% implied probability of a 10%/10%/25%
import tariff on aluminum, copper and Canadian oil, respectively. Our subjective
probabilities of import tariffs in these markets are 60%/60%/15%, consistent
with our views that aluminum and copper would likely be included in import
tariffs targeting critical materials, while Canadian oil tariffs would risk unpopular,
if temporary, gasoline price increases in the US Midwest. No incremental US
import tariffs have been announced at the time of writing, though the situation is
f
luid.
Risks ahead reinforce our core commodity views: Long gold, near-term
upside risks to oil, and long-term downside risk to European gas. We
reiterate that long gold remains our highest conviction trading recommendation
across commodities, driven by structural (Central Bank buying) and cyclical (ETF
buying) factors, and we maintain our $3000/toz gold price forecast for 2Q2026. A
scenario of tariff escalation would further support active investor positioning in
gold, adding to the base case support to prices we already expect. Potential
sanctioned oil supply reductions would support higher oil prices in the near term - though the impact would likely be reversed longer term by an offset from
increased utilization of OPEC spare capacity. We also expect long oil positions to
benefit from a 12% roll yield in 2025. A potential Russia-Ukraine peace deal
would likely increase Russian gas supply to Europe, lowering near-term European
gas prices by 15%-50% and accelerating the longer-term downside we see to
TTF prices
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