GS: When Trillions Rotate Into Billions

Commodities are off to a volatile start in 2026. But Goldman Sachs’ Daan Struyven argues¹ the move isn’t just about weather, geopolitics, or inflation prints. It’s about capital flows. Diversification into hard assets, he writes, can drive “large short-run price boosts because commodity markets are small vs. equities and bonds” .

That asymmetry is the story.

When trillion-dollar portfolios reallocate toward markets measured in tens of billions, prices don’t grind higher... they gap. And because active positioning influences price discovery in commodities, the impact can be immediate.

The rotation doesn’t hit all commodities equally. Metals sit at the epicenter for three structural reasons.

First, market size. Metals markets are simply smaller — “(very) small” in some cases — so the same dollar of inflow moves them more.

Second, supply elasticity. Higher oil prices quickly incentivize short-cycle shale production. Copper and precious metals don’t respond that way. Mine supply is long-cycle and constrained . Gold’s above-ground stock dwarfs annual production, and supply is largely price-inelastic .

Third, storage dynamics. Energy markets can hit storage limits — the “tank tops” problem — which crushes roll returns. Easy-to-store metals avoid that pressure, and physically backed ETFs eliminate roll costs entirely . In fact, physically backed instruments “can also amplify the price boost from investor inflows by reducing available inventory” .

The sensitivity math is striking.

Gold is, in Struyven’s words, “likely the cleanest commodity expression of the rotation in hard assets/private sector diversification theme” . With gold ETF allocations around 0.2% of US financial portfolios, there’s room to move. And the model suggests: “every 1bp increase in the gold share of US financial portfolios…raises prices by 1.5%” . That’s convexity embedded in portfolio allocation.

Copper shows similar flow sensitivity. A 1pp increase in net managed money as a percentage of open interest lifts prices by about 0.7% in the short run — roughly 6.9% for a one standard deviation positioning move . Combine higher positioning with strategic stockpiling, and Goldman estimates up to 25% upside versus its 2026Q4 base case .

Oil also responds to positioning — a 1pp increase in net managed money can lift prices by nearly 3.7% short-run — but shale supply tempers the move over time . Energy reacts. Metals absorb.

The conclusion is blunt. The hard-assets rotation “can keep several metals prices high for longer, including above what physical fundamentals justify” . Goldman explicitly notes this “is the case right now for copper” .

This isn’t just an inflation hedge narrative. It’s a balance-sheet reallocation dynamic. When big pools of capital decide they want exposure to small physical markets, the price impact is structural — not temporary.

If the rotation persists, metals may remain elevated not because supply is tight — but because capital is.

Footnote:

1 Struyven, Daan, et al. The Boost From the Hard Assets Rotation. Goldman Sachs Global Investment Research, 8 Feb. 2026.