Why Goldman Sachs Recommends Overweighting Gold and Underweighting Oil

Goldman Sachs argues that long-term investors should adjust their commodity allocations—boosting gold and trimming oil—to better weather inflation shocks and systemic risks over the next five years.

Gold's Role as a Crisis Hedge

• Institutional credibility risk: Rising fiscal deficits and pressure on central banks may erode trust in fiat currencies.

• Central bank demand: Continued purchases by global banks support gold's price floor.

• Historic tail protection: In any 12-month span when stocks and bonds both suffered negative real returns, gold delivered positive real gains.

Investors can chart gold's long-term performance and volatility using the Commodities API, which provides daily spot and futures data for easy integration into portfolio models.

Why Oil Deserves a Lower Weighting

• Spare capacity cushion: OPEC+ members have ample spare production through 2026, reducing near-term shortage risks.

• Supply slowdown risk: Non-OPEC output growth may decelerate sharply after 2028, keeping a limited strategic oil allocation valuable but below normal weights.

• Inflation shock protection: Although oil can offset supply-driven price spikes, Goldman sees fewer such threats in the next two years.

Quantifying Portfolio Benefits

Goldman finds that pairing positive allocations to gold with enhanced oil futures exposure minimizes portfolio tail losses for a given return target. To see how these commodities have historically smoothed out drawdowns relative to equities and bonds, consult the Sector Historical API, which tracks relative performance across asset classes over multiple decades.

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