Khandelwal argues that commodities now serve a dual purpose: acting as a structural source of returns while providing a necessary hedge against energy disruptions. As traditional asset classes like stocks and bonds face mounting pressure from inflation expectations, the bank suggests maintaining diversified exposure across energy, industrial metals, precious metals, and agriculture. The shift reflects a growing consensus that underinvestment in physical infrastructure has left the global economy vulnerable to price volatility.

Market data underscores this transition, with the Quantix Commodity Index Total Return climbing over 22.5% since late June to reach record highs. The rally is broad-based, moving beyond isolated sectors to touch everything from industrial copper—now trading above $14,000 a ton in London—to agricultural staples hitting three-year peaks. UBS notes that while geopolitical tensions, such as the friction between the US and Iran, keep energy markets sensitive, the long-term outlook remains underpinned by a fundamental scarcity of raw materials. For gold, the bank maintains a constructive 12-month outlook, citing persistent central bank demand and a global move to diversify away from the US dollar as key structural supports.