Gold prices have a different advantage compared to other commodities

The World Gold Council (WGC) believes that gold possesses many different characteristics compared to the rest of the commodity market, from the supply-demand structure, portfolio diversification capacity to resilience in different economic environments.

In the Gold: The most effective commodity investment - 2026 edition report, Mr. Jeremy De Pessemier - WGC asset allocation strategist - said that investors should see gold as a separate allocation in their portfolios, instead of just approaching it through aggregate commodity indices.

According to this expert, commodity indices often determine the proportion based on the liquidity of the futures market or exploitation output. This calculation method does not fully reflect the scale and role of the gold market.

Gold liquidity not only comes from futures contracts but is also supported by the decentralized market (OTC) and ETFs. Meanwhile, gold supply not only depends on annual mining output but also includes the amount of gold stored on the ground that can be recycled, traded and redistributed back to the market.

Gold prices benefit from a special demand structure

WGC believes that gold is a multi-functional asset. Precious metals are both used to protect and increase assets in the long term, and have high demand in the jewelry and technology sectors.

This demand structure makes gold prices less sensitive to business cycles than many other commodities.

In periods of economic instability, reverse-cyclical investment demand can boost gold prices. Conversely, as the economy expands, consumer demand for jewelry and technology can support the market.

According to data analyzed by the WGC, gold has surpassed the composite commodity index as well as most commodity groups in the periods of 3 years, 5 years, 10 years and 20 years.

Another advantage is the ability to diversify portfolios. WGC believes that gold has a low or almost unrelated correlation with many other assets.

In particular, the correlation between gold and stocks may vary depending on the economic environment. During the growth period, gold may be consistent with the stock market. However, when risk avoidance sentiment increases, gold tends to be inversely correlated with stocks.

In the global stock sell-off in Q4/2018, the MSCI USA index fell 14%, commodities fell 9%, while gold rose 8%.

Similarly, in the first quarter of 2020, when the market was strongly affected by the COVID-19 epidemic, MSCI USA decreased by 20%, goods decreased by 23%, but gold still increased by 6%.

Gold market trades 373 billion USD per day

WGC also emphasizes the advantage of gold in protecting investors against inflation. In times of high inflation, commodities can generally bring positive performance, but gold usually yields better results.

When inflation is low, many commodities can record negative nominal profits, while gold still has the potential to generate positive profits.

Liquidity is another factor that helps gold stand out. According to the WGC, the average daily trading value on the global gold market reached approximately 373 billion USD in 2025.

The scale and depth of the market allows gold to meet large trading demand, including from institutional investors with long-term holding strategies.

WGC said that commodities in general usually account for less than 10% of the total investment portfolio, while gold only accounts for a small part of this group. This means that many portfolios have a level of exposure to gold below 1%.

Analysis over about 20 years shows that adding gold can simultaneously improve absolute returns and reduce portfolio volatility compared to not holding gold or only investing in a wide basket of commodities.

Mr. Jeremy De Pessemier said that although gold is classified as a commodity group, it is not an ordinary commodity. The specific supply-demand structure, large liquidity, diversification ability and resistance through many cycles make gold have its own role in the asset allocation strategy.