Goldman Sachs is urging long-term investors to reevaluate gold and oil’s roles in their portfolios. In a strategic note, the bank recommends a higher allocation to gold and a lower one to oil over the next five years, citing their historical effectiveness as hedges.
“Positive long-run allocations to gold and enhanced oil futures are optimal for investors seeking to minimize risk or tail losses for a given return,” Goldman noted. Gold is seen as a shield against declining institutional credibility, while oil protects against supply shocks. The bank also highlighted that, historically, “during any 12-month period when real returns were negative for both stocks and bonds, either oil or gold have delivered positive real returns.”
Goldman’s overweight call on gold is driven by “the high risk of shocks to U.S. institutional credibility (e.g., fiscal expansion, pressure on the Fed), and the central bank demand boost to gold.” Meanwhile, oil is underweighted due to current oversupply, though longer-term risks remain: “A sharp slowdown in non-OPEC supply growth from 2028 raises the risk of oil inflation shocks down the road.”
For short-term tactical portfolios, Goldman advises using “oil puts (or put spreads) to hedge against ongoing recession risks and to benefit from increasing oil supply.”