Overview:
As a period of unpredictability seems to loom over the future, investors may look to hedge portfolios and protect their prospects. One way investors can do this is by investing in commodities — a set of natural resources that serve as staples of the economy and tend to be less turbulent investments overall. The most popular among these is gold, but why is it chosen over others?
Why Commodities Matter
Ongoing geopolitical conflicts, policy uncertainty, global inflation, and a lack of consumer confidence have sparked a need for safer waters in the investing world. For investors, these phenomena all speak to steeper risks in the market.
If a market were to crash or an economic bubble burst, investors in those sectors would lose the value of their capital assets. There are many methods of risk management — such as diversifying investment portfolios to limit damage from market shocks. However, one constant remains: investment in commodities, especially gold.
Golden Standard
Historically, commodities defined the worth of currencies. Commodity money was currency valued for the intrinsic worth of the metal in a coin. The world eventually shifted to representative money, which itself has no value but represents something that does — this is where the “gold standard” originated.
Under the gold standard, the U.S. government was obligated to buy and sell gold at a fixed price. This tied the value of money to gold. Today, most of the world operates on fiat money, or government-issued currency whose value is based on public confidence rather than a tangible asset.
Full Circle
This brings the conversation full circle: when global confidence in markets wavers, investors often turn back to gold to preserve their wealth.
According to the Chief Economist’s Outlook survey, 82% of economists across industries and international organizations describe current economic uncertainty as “very high.” Similarly, 77% anticipate weak growth in the U.S., with 76% forecasting a weakening dollar (World Economic Forum, 2025).
Even outside the U.S., these effects ripple across global markets. The U.S. dollar remains the world’s most common reserve currency, so any significant movement in its value can cascade through other economies (Federal Reserve, 2025). Add to that geopolitical conflicts, supply-chain disruptions, and trade policy shifts, and you get an environment where investors seek stability over speculation.
The Gold Standard and Its Legacy
The gold standard was ultimately discontinued because it proved unsustainable during times of crisis. Bank runs and gold hoarding limited central banks’ ability to meet money supply demands, which hindered economic growth.
This shortage led to deflation, as limited credit reduced demand. Falling demand caused falling prices, and falling prices led to higher unemployment.
Once the U.S. moved away from the gold standard, gold found a new role: a safe haven commodity during times of inflation. When inflation rises, demand for gold tends to rise as well. This increases its price and reinforces its reputation as a stable asset.
Unlike fiat money, which is theoretically unlimited, gold is a finite resource. This gives it inherent stability in the long term. Ironically, this scarcity is the reason it was once removed from monetary policy. It is now one of the reasons it’s valued so highly.
Uncertainty and the Case for Hedging
Goldman Sachs urges investors not only to diversify their portfolios but to hedge them as well. Hedging means offsetting potential losses in one investment by holding another asset likely to perform well under the same conditions.
For example, an investor expecting a decline in domestic currency might shift assets toward international stocks or commodities. In this sense, commodities act as insurance — a hedge against inflation or instability.
Monetary policy that raises interest rates to combat inflation often increases the opportunity cost of holding non-yielding assets like gold. Yet commodities as a whole tend to rise in value during inflation, as they form the basis of the “basket of goods” that inflation measures.
Beyond Gold: Other Commodities to Consider
While gold gets the most attention, it’s not the only commodity worth watching. Other investable commodities include:
- Industrial metals such as copper and platinum
- Energy resources like oil and natural gas
- Agricultural products such as wheat, corn, and livestock
Each has its pros and cons. Energy and agricultural commodities may offer higher cumulative returns, but they’re more volatile. Gold, on the other hand, offers stability. This quality has led central banks worldwide to increase gold holdings as part of diversifying away from the U.S. dollar (Arnott, 2025).
Industrial metals and crops can be inflation-resistant, but they lack the same psychological and historical reliability as gold (Fiona, 2025).
This discussion isn’t intended to promote any particular investment, but rather to help readers understand why gold continues to command trust in uncertain economic times.
Sources
- Morningstar: Commodities vs Gold – Which Is the Better Inflation Hedge?
- Asia Commodity Market: Top Commodities to Invest in During Inflation
- Goldman Sachs: Why Investors Should Hedge with Gold and Other Commodities
- World Economic Forum: Chief Economists Outlook 2025
- Federal Reserve: The International Role of the U.S. Dollar (2025 Edition)
Editor’s Note: This article is for informational purposes only and does not constitute financial advice. Readers are encouraged to conduct their own research or consult a licensed financial advisor before making investment decisions.
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