Commodities weekly: Geopolitics and index rebalance in focus as 2026 begins

Precious metals: safe haven demand meets index flows

Precious metals have been the clear leaders so far. Gold, silver and platinum have all started the year strongly, reflecting a mix of geopolitical hedging, financial flows and structural investment themes. Rising geopolitical risk linked to Venezuela and Iran has revived safe-haven demand for gold, while silver has benefited both from its monetary role and its industrial link to electrification and solar demand. Platinum, which is not part of the Bloomberg Commodity Index, has been one of the top performers.

At the same time, precious metals are being influenced by an important technical factor: the annual rebalancing of major commodity indices. After outsized gains in gold and especially silver during 2025, index-tracking funds are required to trim their exposure to these outperformers and reallocate toward underweighted sectors. These futures flows are mechanical and price-insensitive, but they can still create significant short-term volatility. How gold and silver behave during this five-day rebalancing window will be an important test of the underlying strength and whether deeper physical and investment demand is strong enough to absorb the selling.

Positioning data from the latest Commitments of Traders report, which has now resumed after the US reporting delays, adds useful context. In gold, net long positions held by leveraged funds were reduced during the second half of 2025, but this largely reflected rising prices forcing traders to scale back exposure to keep risk constant, rather than a loss of conviction. In crude oil, by contrast, speculative length ended 2025 at one of the weakest year-end levels on record, suggesting that oil is far from crowded on the long side even as geopolitical risk is creeping back into prices.

Industrial metals: copper leads but inventories test the rally

Industrial metals have also had a strong start to the year, led by copper and aluminium. Copper in particular has been supported by a powerful combination of structural and short-term factors, but recent inventory data raises the question of whether a short-term peak may be forming. Stocks monitored by the three major futures exchanges have risen to a fresh eight-year high of 789 kt, with Shanghai inventories up 35 kt to 181 kt and ongoing tariff-driven shipments lifting COMEX stocks by 13.7 kt to 467 kt, leaving close to 60% of all visible exchange stocks held in the US.

Copper prices still hit a fresh record high earlier this week, with prices on the London Metal Exchange reaching USD 13,390, almost three times the 2020 Covid nadir. This comes despite reports that Chinese industrial users are scaling back purchases as they struggle to pass higher costs on to manufacturers, a mix that points to softer near-term demand and rising inventories after a 41% rally over the past year. Longer term, however, electrification, grid expansion and data centre build-out, combined with years of underinvestment, declining ore grades and limited project pipelines, mean the global copper balance remains structurally tight, even if the path higher is unlikely to be a straight line. 

Energy: oil caught between disruption risk and surplus, gas hit by warm weather

US natural gas has been the weakest performer in the entire commodity complex, down close to 10% year to date as mild winter temperatures have slashed heating demand and left storage levels comfortable. In contrast, crude oil prices are modestly higher, reflecting a tug of war between near-term supply risks and medium-term surplus concerns. The situation in Venezuela has brought the risk of immediate production and export losses into focus, even as the market debates whether a future political transition could eventually unlock higher output. Any meaningful recovery in Venezuelan production would require years of investment and billions of dollars in capital, meaning that the barrels the market is worrying about losing today cannot easily be replaced tomorrow.

Iran adds another layer of uncertainty. While exports have so far continued, rising unrest and the potential for tighter enforcement of sanctions or internal disruption keep a geopolitical risk premium embedded in prices. At the same time, the broader oil market remains well supplied, with non-OPEC production growing and inventories adequate, which helps explain why oil has not broken decisively higher despite the headlines. This leaves crude prices stuck in a stalemate between disruption risk and surplus narratives. At the same time, traders remain poorly positioned for a rebound, while the ongoing commodity index rebalancing will add a layer of mechanical buying. Technically, resistance sits just below USD 59 in WTI and USD 63 in Brent, with a clear break above these levels potentially triggering momentum- and short‑covering‑led extensions. 

Energy markets will be watching closely for any concrete Venezuelan developments following meetings between Trump and US energy executives, as well as how to reconcile calls for lower prices with producers’ warnings that aggressive price pressure could curb domestic shale output.

Agriculture and softs: broad gains with cocoa in the spotlight

Agricultural and soft commodities have also contributed positively to the early-year performance. Coffee has rallied on weather risk in Brazil and a supportive currency backdrop, while wheat found support as dry weather fuelled concerns about crop conditions in the key U.S. while soybeans have found support from regional supply concerns and  continued purchases from China the world's top importer after a late-October trade truce with Washington.

Cocoa has received heightened attention after it was confirmed it will return to the Bloomberg Commodity Index for the first time in decades with a 1.71% weighting, triggering a wave of mechanical, non‑fundamental and technically driven demand. Goldman Sachs estimates index‑related buying at around 29,000 lots, equivalent to 23% of current open interest and roughly 1.75 times average daily volume. Whether cocoa extends further will depend on how much of this demand has already been discounted, with current technical levels offering limited incentive to initiate fresh exposure.