Commodity Watch: Four Trends of the Physical Asset Fight Back

<div class="grid grid--33-66-col"><div class="col"><img loading="lazy" src="/getContentAsset/061c994a-a452-418f-bfa0-f2cf3cf5c577/cb87803a-320c-480f-ab75-7b9029eaaf79/Ahmad-Al-Sati-new.png?language=en" alt="Ahmad Al Sati - insights" title="Ahmad Al Sati - insights" style="width: 180px" class="fr-fic fr-dii"></div><span style="font-size: 12px"><div class="col"><strong>AHMAD AL-SATI<br></strong>PORTFOLIO MANAGER<br><br><p>Ahmad is the President and Portfolio Manager for Gemcorp Capital Advisors LLC, based in New York.&nbsp;<br><br>Ahmad has spent most of his career in the global credit markets. Prior to Gemcorp, Ahmad was President of Pandion Mine Finance and RiverMet Resource Capital, LP - a fund focused on investing in precious metals, where he was responsible for managing the investments and the day-to-day operations of the registered investment adviser.&nbsp;</p></div></span></div><hr><p>Ten Days That Shook the World (1919) by an American chronicled the Bolsheviks’ seizure of power. To quote Lenin: “There are decades where nothing happens and weeks where decades happen”. A lot happened in 2025, perhaps epitomised by the 7 days after Liberation Day when the S&amp;P 500 dropped by 11%, before rallying when tariffs were paused. In retrospect 2025 might be viewed as an acceleration year for secular trends that have been building since COVID.</p><p>Here are four trends we discussed the most in Commodity Watch during 2025:</p><p>One. If you look, scarcity is everywhere. Ore, refined materials and agricultural products suffered shortages in 2025. Cocoa, beef and rubber shortages were driven by disease, weather and underinvestment. Metals suffered from a dearth of new discoveries, worsening ore grades and underinvestment even as the demand for some metals (e.g. Copper) outpaces supply. Refined products continue to be susceptible to chokepoints driven by concentration, underinvestment in the West and trade tensions. Higher prices may ultimately fix supply, but the lag time will be long and the intermediate period volatile. Twice before we saw fragile supply succumb to shocks (1970s and 2000s) and twice before we saw commodity prices rally.&nbsp;</p><p>Two. The revenge of the physical economy is just starting. Increasingly, economies countries are reliant on physical products to power their economies. Infrastructure drives demand for commodities as the world builds or upgrades infrastructure to meet population needs (cement, aluminium, asphalt etc…) . Electrification and AI add to demand as generation, transmission and storage of electricity and data centre rollouts are grounded in real assets such as copper, graphite, lithium and rare earths. Securing commodities, along with capital and labour, is key to meeting that increasing demand. Yet, securing commodities today is more uncertain than ever as underinvestment and trade tensions threaten supplies.</p><p>Three. Trade disruptions will matter more. The world is increasingly reliant on commodities (see point two above). But unlike finished or semi-finished products, commodity production cannot be onshored. Rather they are produced where geology and weather allow for it. Mining and farming rely on complex global supply chains that require long term planning and certainty (it takes around 18 years to plan a mine and farming for some produce is a multi- year process). Changing trade flows haphazardly and post-fact derails production, creates disruptions, causes delays, aggravates bottlenecks and increases prices. That may not only hamper growth, but may make inflation stickier.</p><p>Four. The dollar sits at the centre of it all. Increasingly, governments are realising their dependence on a US system rooted in the USD. And increasingly, they are looking for an exit. Building the payment rails is easy. The issue is convertibility. Sellers don’t want to be paid in a currency that is not easily convertible, and they don’t trust other currencies. Gold changes everything (and so it continued to rally in 2025 and may continue to do so as countries hedge against US policies). If a currency is convertible to gold, then more countries will use it and pivot away from the USD. A full pivot will take time. But the process will weaken the USD placing inflationary pressure and purchasing power degradation on an already stretched US consumer. A weaker dollar will also benefit emerging market countries and perhaps drive a renaissance in EM assets.&nbsp;</p><p>A new economic regime has portfolio implications. Ultimate impacts are still unclear and change takes time. Diversification and nimble allocations are key. Both allow portfolios to weather geopolitical and economic storms and position them to benefit from exposure to potentially rising asset classes. The 2000s and 1970s remain a signpost in this case.</p>