Material Matters: Digging into Commodities

Stay tuned after the conclusion of the podcast for additional important information. Subscribe for more episodes connecting macro trends to portfolio strategy and visit PIMCO.com for extensive research and resources.

Voice-over: Welcome to Fixing Your Interest. Today’s episode takes us inside the global commodities landscape at a time of powerful structural and cyclical change.

Leading the conversation is Ryan Blute, Managing Director and PIMCO’s EMEA Head of Global Wealth Management.

He’s joined by Greg Sharenow, PIMCO’s Head of Commodities and Real Assets.

Together, they’ll unpack the key forces shaping commodities in 2026: what’s behind gold’s rally, how investors should think about commodities role in a portfolio.

They’ll also dig into the key questions shaping energy — from how to value a barrel of oil, to Venezuela’s supply potential, and the rising power needs of data centers.

Ryan Blute: Hi Greg, thank you for joining us for PIMCO's Fixing Your Interest podcast. Really thrilled to have you here today with us out of PIMCO's London office. Apologies for the weather. Not as nice, I know, as Southern California, where you live most of the time, but really happy to have your here, given all the things that are happening these days in the commodities markets.

Greg Sharenow: Thanks for having me, Ryan, I'm looking forward to the conversation.

Ryan Blute: And one of the things that probably our listeners will find interesting is why is PIMCO here talking about commodities? I think when many people hear PIMCO, they just think fixed income. But we've been managing commodities for probably about two decades with tens of billions in assets under management in commodities. So where does that come from? What's kind of the linkage between PIMC and commodities?

Greg Sharenow: The linkage is driven by the fact that at the end of the day, if you're an investor, you need a variety of assets, right? The diversification that people are looking for in inflation is a key consideration for investors. Commodities are an effective hedge to inflation. As a result, it was natural to add our commodity franchise onto a platform that was already pretty large and prominent in fixed income to have that diversification opportunity set.

Ryan Blute: And then probably most people would assume commodities are maybe more for industrial purposes or agriculture they may think of with commodities, but what's kind of the rationale or the role that commodities would play in an individual investor's portfolio? Because that may be a bit of a surprise that that should be part of your portfolio.

Greg Sharenow: For an individual, it's a little bit different than an institution is trying to manage long-term liabilities and certainly inflation shocks or inflation regime changes matters a lot to overall asset pricing. But for an individual certainly the diversification benefits also apply. And when you think about commodities itself, when we've had inflation shocks like we had in the last five years, what was the one liquid asset that an individual had? It's, you know, real assets in their portfolio. Houses became illiquid, you know, any sort of investment in sort of like infrastructure became long duration, highly illiquid. Commodities were one of the few assets that investors had, whether they be institutional or whether they'd be individual, that they were able to use as a source of liquidity to pivot back into other markets that became distressed or had meaningful downdrafts such as equities. So commodities ended up being very much a textbook outturn for what the reason to own commodities are in portfolios. Now. If you go back over the last 40 years, there have been periods where commodities were not well-performing asset classes, but they tended to be in very low inflation environments. But when you do have it, there's no other asset class that easily replicates the returns that it gives and the diversification benefits that it offers.

Ryan Blute: Okay. And then with commodities, I think people probably initially kind of gold comes to mind maybe initially, but then there's a lot more to commodities. Could maybe, could you just spend a couple of minutes talking through the different kind of sub-sectors of commodities because I guess they also behave quite differently at times.

Greg Sharenow: Yeah, so the commodity indices that have been formed, and there's a few different ones that provide the benchmark, combine a large number of commodities that are meant to represent either something more tilted toward a consumer basket or a broad representation of commodities. Now, each individual commodity will have different macro factors and micro factors that will ultimately drive it. So the basket of commodities that are out there are meant be a little bit more diversified. That give you a potential different ways of... Of earning a positive return, but all of them ultimately do feed into inflation, whether it be agriculture, it's part of our foodstuff, so whether it'd be energy that goes into everything that we consume, and for transport, obviously. So while gold is certainly one of the most commonly talked about assets, the commodity indices in general offer a diversified approach to investing, and you have to be a little less right on any one commodity if you own the basket. If you OWN gold... You know, we had 20, 30 years of poor performance in gold while other commodities were actually outperforming. Now, over the last 12 months, no asset class compared to what we've seen in the precious metal space. But over the fullness of time, like certainly during the peak of the inflation shock, you wanted to own oil and you've wanted to on other commodities that were susceptible to either supply side challenges or political disruptions that gold may not always offer.

Ryan Blute: Okay, and we're here in early 2026, and we'll talk about gold in a minute, which has been stealing lots of the headlines. But just as you look ahead over the next year or two years, just kind of at a more macro big picture level, what do you think some of the drivers are going to be of commodity market performance?

Greg Sharenow: Well, certainly, economic growth is always like a big driver in perceptions thereof. With the big tax subsidies or the big tax refunds coming in the US, will that offer an incentive to additional growth? In addition to that, if we end up seeing the Supreme Court ruling that tariffs are unconstitutional as currently formed, you could actually see a pretty stimulative environment from industrials and consumers who will race to hedge or at least import what is now. Tax-free or tariff-free goods, like those sort of macro conditions are gonna be very important. Same with like the fiscal spending in Europe and in Japan, potentially going higher, like you could have a real fiscal impulse that will be drivers. Now there's always downside risk as well. So ultimately the macroeconomic out-term will be important. But if you're talking commodities, you can never avoid the political and geopolitical landscape, like certainly with the discussions going on with Iran right now, but also weather. As we've seen in Europe over the last couple of months, we've see some pretty extreme weather. I've seen some pretty extreme commodity price moves related to that. And ultimately when you start getting into the spring and summer, there'll be a lot of focus on the growing conditions for agriculture. Like those are always gonna be the annual risk to the commodity market, but they've been more volatile in recent years. And sort of like, you can argue related to changing climate. And those will ultimately be important drivers of what commodities do.

Ryan Blute: And how important is China in that picture, whether China's growing strongly or if its growth is under more pressure? And you hear people talk about, oh, is the U.S. Gonna sell soybeans to them and what does that do for prices? But bigger picture, like how influential is China's growth backdrop to the commodity markets?

Greg Sharenow: So they're still one of the largest consumers of pretty much every commodity out there. So their changes in their growth matter a lot. On soybeans, it's a little bit strange because unless you eat more soybeans or process more soybeans for downstream usage, it just changes the geographic location of the buying and doesn't really change the balance sheet, even though it does impact the short-term trading mentality of the US-based futures curve. But at the end of the day, as China slows... Or has slowed in the past few years, it's certainly been a headwind to some commodity demand growth, certainly on the oil side, where you've seen a meaningful deceleration of demand growth. Certainly for on-road transportation. But at the same token, if you look at a lot of the industrial metals, if you would have told me that the residential and commercial construction in China was gonna go into a recession, for lack of a better word, the last five years, that their metals growth would have sustained the growth levels that they did, you would've said no way. Thing that's been happening that's really interesting in commodities, the energy transition, now supported by AI, is really creating a new demand source. So even if we've seen China decelerate on residential commercial, we've actually seen the acceleration in other sectors being the driver. So we have to look under the hood to see what is actually happening in China. Is it industrial spend? And if so, what kind of industrial spend and how intensive it is of commodities.

Ryan Blute: Okay, and then maybe a little bit more, because you mentioned rare earths or industrial metals. So I know there's been a lot of focus on China having the large stockpile and made the infrastructure investments in recent decades to harvest some of these rare earth's. How does it maybe impact the commodities markets or the metals markets if you were to get more progress? I think President Trump and some of the European leaders have talked about building up a strategic reserve, kind of like they've done for petroleum in the U.S. For minerals. Is that really playing the commodity market prices for what you do?

Greg Sharenow: From the understanding we have of what the current loans and financing plans are, it's not really in commodities that we are trading. But I do think the strategic nature of what is being looked at is incredibly important. If you go back to last summer with the magnet pause of exports to the United States and the US responding with a pause on ethane exports to China, you've kind of entered into another layer for where... Strategic imperatives, whether it be for security of supply, military, industrial dependencies, we're seeing a real desire for many different countries, whether forming through a block or independently, to really build up resiliency in the system. And that building up of the resiliency ultimately means more capex and more investment than maybe the market would have solved for independently. And that tends to be very energy intensive and very materials intensive. So right now, if you're looking at a world that security, strategic competition, are all coming together in the commodity space, it tends to fairly supportive for the demand side in the short term until you build the supply side, which in many of these assets are minimum three, but more five to 10 year in the future to investment turns into actual production.

Ryan Blute: Ok, let's maybe pivot towards gold. I think there's obviously probably a geopolitical element to gold and maybe what's happened in the last few years. But what's been driving this huge rally in gold? I mean, everybody's watching it in recent months.

Greg Sharenow: There's definitely a greater share of retail investors and institutional investors recently than maybe going back three or four months ago, because it has been a pretty sharp, very brief, over a very brief period of time rally. But if you look at the longer trends in gold, certainly following the Russian invasion of Ukraine and then the freezing of Russian assets by US and Europe, we have seen a meaningful increase in central bank buying patterns. From central banks all around the world who are looking to diversify their holdings. And I think the millennial, millennium long rather view of gold as a physical real asset that you can have, you know, and it's highly dense, highly valuable, benefits to an individual country who may be at one point worry about running afoul of any number of their potential trading partners, China, the US or whatever. And they have to sit there and say, well, I want to have a balanced risk profile. Gold is certainly accelerated from that standpoint. But I think another point that happened at that time is we were certainly in the throes of meaningful inflation. And I think investors found themselves, particularly around the world, not just the US, but if you think of emerging markets, where they found themselves not only short real assets because their model was built on the idea that their economies will in a good demand environment, and that will be. Stronger local currencies that will be at a time of rising inflation, but they'll have some buffers built into their system, found themselves with a weaker local currency and the inflation staying without the growth backdrop, which really was the framework from the 2000 to 2008 commodity cycle, but was not this most recent one, which really more of a supply shock. So I think you've seen global investors finding them, re-evaluating their portfolio holdings and saying, oh, we are really short real assets. And what is gold viewed as? Well, over a long period of time, it's a store of value real asset. Maybe doesn't earn you much more than inflation over that period of a time, but certainly is a liquid proxy for ability to hedge. So I that also is driven, it's not just geopolitical backdrop, it really is like a portfolio construction, particularly in places in the world that the model of their portfolio was challenged.

Ryan Blute: And then, what about individual investors, because as you mentioned, their participation in these markets has exploded, I guess, in recent months and quarters. So how do individual investors access gold, and does it matter if demand for gold jewelry goes up? Does that really do anything to gold prices? I want to kind of get a sense of what's the mix of that stock of gold that's out there between the central banks, jewelry, industrial uses.

Greg Sharenow So it is tough to compare with the size of the central bank and their ability to deploy capital. Retail investors access it through, whether it be ETFs, which really exploded in the scenes around 2002, 2003, and became a democratized access for investors to gold who didn't have to go to a store and buy a bar or a coin, and then put it in their safe, they could actually access it. But now we have some tokenization as well. That's increasing the opportunity for people to own gold, but do you still have gold?

Ryan Blute: And do you still have gold in your portfolio?

Greg Sharenow: Professionally and individually, yes, but you know, I've been at this 27 years and I always have a diversified holdings of inflation assets and gold is one of them for sure. But you know retail investors also have been active in coin purchasing and as well as buying like bars and whatnot. Now I will say though on the jewelry side, there is a price sensitivity. We do see it. In addition to that, the recycling of gold back from jewelry or silver now in terms of your candlesticks and your spoons and whatnot have also increased. So one of the balance sheet of gold is not only mine production, but it's also recycled production. So that recycling also tends to go up with higher prices. Now there's the higher volatility is making that challenging in that industry because If you're buying gold historically, you're operating off like a percent, you know, discount and prices are moving that in the time I finished the sentence. You know, it's a little bit, it has created some challenges in the system, but as volatility comes down again, you will see a higher supply of recycled materials.

Ryan Blute: Interesting. OK. And let's also maybe now include cryptocurrency or Bitcoin as an example. Proponents of the kind of dollar debasement view would have said historically, well, crypto and Bitcoin is a good store of value if fiat money is going to become debased. Others might have said gold serves a similar purpose and has for a long time. How do you make sense then of this divergence we've seen in recent months between the behavior of prices and, let's say, Bitcoin prices.

Greg Sharenow: Well, I'll be one of the first people to tell you, I don't know how to value Bitcoin. Is it a real asset? Is it an nominal asset? Don't have a lot of history to actually help you inform that. And the volatility is so high. You know, yes, volatility in gold is high right now, but we're talking about like 30% vol. You know 35% vol in a stress environment, Bitcoin is multiples of that. So it's really hard for me to have a strong sense of how to value that asset. And also if you look at it, on the energy mining. Driven cost models, you still have a huge spectrum. To us, Bitcoin has been hard to think about in the terms of the real asset spectrum, which is where we focus on. But I think gold has basically asserted itself in terms of how people are approaching diversification and the physical benefits of owning gold have resurfaced. And Bitcoin does not have that millennium long history of that.

Ryan Blute: And then what about maybe related metals? So silver, obviously, has been even more volatile than gold in recent weeks and months. But does silver play a role in someone's portfolio? Or is gold unique in some particular way, whereas platinum and silver might be inferior substitutes?

Greg Sharenow: Yeah, so it is an inferior substitute for gold, in our opinion. If you look at gold, it is a central bank reserve. Silver is not. The density of it makes storing it meaningfully harder for value. You can put a billion dollars in your cooler in gold and you need a storage, you need one of those like tank, trucks, like the back of a trailer truck to store the same equivalent in silver. It also doesn't, it doesn't hold well like gold does. So I think silver is not the same as gold, I think. It's a dangerous proposition to put it in the same bucket. And in addition to that, 70-ish percent of the demand is industrial. Depends if you're quoting mine supply versus final demand. I've just chose the midpoint between those two. That's price sensitive. And we've already seen consumers of silver baulking at these prices. And I think that's gonna be a real headwind where at the end of the day, you know, the bigger risk on gold is recycling and that'd be a big growth while silver also has that. So I don't put silver and platinum in the same bucket as gold. I actually think there's, the exuberance in silver is more dangerous while in gold, you could have a 15% retrace and it won't change the story at all because I think there is a lot of real assets, long-term capital buyers who are looking to accumulate, whether it be central banks, sovereign wealth funds or ultra high-nevered individuals.

Ryan Blute: Let's maybe now shift to oil and energy, which is historically another big and sometimes volatile part of the commodities markets. So how do you, we talked about cryptocurrency and you said it's tough to kind of figure out how do I value something like that, but how do think about what the fair price of a barrel of oil is today, or even just in general, and you've got all these cross currents of geopolitics, sanctions. How are you thinking through that?

Greg Sharenow: Yeah, so it's funny that I get asked, you're asking me that question on oil and not gold, where gold, if you go to like most of the bank's research, it's 1.1 times current price equals gold forecast. Like oil, we have like a, and gold is dominated by capital flows. So I feel like that's way harder to have a firm value and number. Oil, we a very large selection of producers. We have a good sense of what the production cost over a long period of time is. That helps anchor the long end of the curve, which is really probably the most important thing about the oil market, and you can get the same in natural gas and in agriculture where you can sit there and say, like, in three to five years, the supply will be ultimately able to react as long as there isn't some geopolitical overriding factor to that. And that provides you like a broad anchor. And we saw during the super spiking commodities, we lost that anchor because we weren't able to identify production growth at nearly any price at that time. Look at the oil majors. They were under delivering production growth relative to their forecast, like almost quarter after quarter after quarter. And that became on anchor, but since shale has come in, and frankly we've seen meaningful improvements in deep border production in terms of like delivering on schedule, on time, cost impression there as well. We have a fairly good sense that in like the mid 60s in Brent, you can generate production growth. So that kind of gives you that anchor where we've been for much of the last decade. Now the front will obviously move around based on supply and demand imbalances today. That could be a function of Iran, that could be function of economic growth or lack thereof. So what we do is we try to fix what we think the long end of the curve would and then we think about the prices around that based on. What is the supply and demand imbalance today. Now, if you look at oil, we've been around $65 Brent for most of the last 18 months. Yes, we've gone from 60 to 70 and 60, 70. But at the end of the day, it's been a relatively tight range. And I think that's because the anchoring function has been the predominant right now.

Ryan Blute: And if we think longer term, and at PIMCO, we often talk about the secular horizon, so let's say the next five years, you could even go super secular if you want with this answer. But on the one side, you have better technology, you maybe have an administration in the US that's more open towards oil exploration and production. On the other hand, maybe on the demand side, you maybe more interest in efficiency and ESG and environmental sustainability. So longer term how do you think about the balance between changes in demand, changes in supply? And what that means for long-term equilibrium prices.

Greg Sharenow: Yeah, so I think what we've seen is a deceleration on on-road transportation demand and a movement to petrochemical driven demand growth, which is not great for an oil producer because the barrel produces way more transportation demand. How you balance the changing nature of consumption, you can sit there and you can do your best modelling of where you think the demand outcomes will be based on different technology pickups. But almost invariably, we've been over impressed, or we haven't been, you know, our assumptions have been too pessimistic on exactly what the change in nature in a place like China in terms of their on-road demand, whether it be displacing oil through higher LNG, liquefied natural gas, sorry, demand for trucking, or whether it'd be greater penetration of electric vehicles and plug-in electric hybrids, which are now being exported to the rest of the world. You know, I think we still have a fairly cautious view on what the on-road demand will be. So it's gonna be air travel and it's going to be petrochemical that's driving demand. And I think you have enough visibility in that that by 2030, 2035, you're still gonna be growing, but you're gonna be at probably a slower growth rate than what we were used to before these technologies. On the supply side, the nice thing is a lot of the supply projects are large, so you do have a pipeline that you can kind of monitor and watch. And you can figure out what they are. And then the US is, arguably speaking, gonna be more susceptible to where the price movements are locally, because that can impact a six to 18 month horizon. Though we are seeing a more muted price responsiveness in the US now, because we've had a massive consolidation in balance sheets, into like better balance sheets for a lot of the oil producers. And we've seen a maturation in the basin. So even there, you have a little bit less variability in your outlook than you might've had a few years ago.

Ryan Blute: Okay, and then maybe one supply wildcard we wouldn't have predicted six months ago maybe is Venezuela. So, a lot of noise around potential supply and technology improvements out of Venezuela. From your perspective, is it going to be a game changer? Is it more news and more noise, but that's kind of it.

Greg Sharenow: No, I think Venezuela is going to be a long-term story and not a six to 18-month story. Like sure you can get a couple hundred thousand barrels per day more supply out of Venezuela, but in the size of the oil market that is pretty de minimis and there's still a lot of uncertainty about whether or not the right framework will be in place to actually usher in. But you can have a couple of hundred thousand barrel per day just recovery from local from highs of last year without. Without much of a challenge, I don't think. But beyond that, to be a meaningful contributor in 105 million brow per day market, Venezuela at 800,000 brows per day to one million brows a day, you're gonna need to have a lot of time to grow that to something matters.

Ryan Blute: Okay. And then maybe now back to the demand side. So a lot of interest in hyperscalers and the need for more data centres and then the associated power consumption there. How do you think about, maybe this is also secular, but how do you through the demand for power from these data centres? What's that going to have in terms of an influence on supply or on prices? And maybe even on precious metals that they might need for these facilities.

Greg Sharenow: Well, I think there are actually also very meaningful base metals and, you know, basic materials to build the infrastructure to support it, more so than precious, to be honest. But I think the biggest impact is potentially on power and then natural gas. For oil I think it's pretty de minimis in terms of the larger scale impact. The political challenges though of this is really asserting itself because how do actually deliver this. Bring these data centers on the grid and deliver the power in a way that's not adverse to consumers. And that's a real challenge. And you're seeing it show up in, I think six states have put a moratorium in the United States on AI data center or new projects as they sit there and try to figure out what's the right structure and framework for it. And then the other part that makes the energy a little bit tricky is, If you listen to what NVIDIA has been saying about chip efficiency and you look at the potential for more optimization of that going forward, recognizing that energy is a vulnerability, you have a good chance you don't end up needing nearly as much energy as one would have expected before. So there's a chance you end up overbuilding power plants, you end up over building supply, and you end up on the other side, but until you do that, which is, again, that spatial time challenge you have where supply responds on a much longer horizon, then demand is potentially changing. Like you could have periods of very tight power and gas markets over the next few years until you end up building the pipeline of supply to address it.

Ryan Blute: Okay, I want to now end with a few rapid fire questions. Number one, what precious metal are you most constructive on over the next 12 months and why?

Greg Sharenow: Gold, I think the central bank holding sovereign wealth fund desires, the ultra-high net worth individuals who may not find nearly the value in art and fine wine and chateaus in southern France than they may have in the past find gold very appealing.

Ryan Blute: Okay, so structural shift, you think, in demand for gold. 

Greg Sharenow: Correct

Ryan Blute: Okay, great. What's one risk to commodity market performance which you think the consensus is missing right now? Or I guess where you have a different view than what the market does.

Greg Sharenow: So I think one of the biggest catalysts for commodities, and I haven't really heard a lot of people talking about it, is if we do get the Supreme Court reversing the authority for Trump. I think that could create a real short-term demand impulse. That would be quite meaningful. I think, that's on the positive side. I think a negative side will be like if we end up having some sort of deleveraging event given the fact that we are seeing a tremendous amount of investor interest. Now what could spark that deleveraging event? Hard to say, but at the same token, when you look at what's gone on in the software stocks, you look what's going on across the market, there's a tremendous amount of volatility under the surface even if some of the indices are not showing it. So if anything goes wrong, I think that would take commodities with it down.

Ryan Blute: And one final question. We talked a lot about precious metals and gold. We talked about a lot of energy and oil. But what's something interesting happening, I guess it's called the softs, the part we didn't talk about as much, agriculture, soybeans, things like that. What's something happening interesting there, kind of below the surface, that the average listener might not be attuned to?

Greg Sharenow: Well, I would describe it as a relatively benign backdrop we've seen for a lot of the row crops, and we've see improvements in some of the cocoa and so forth harvests. We were in a period of pretty big distress. So actually, if anything, I think the agriculture space has been more well-behaved and less straining on the global politics and inflation than it was, you know, two years ago or... Five years ago when we were having some real crop failures, and we have concerns over Russian supplies and Ukrainian supplies. But I would say the one commodity we haven't really discussed has been copper, which is to me a very interesting story because when you look at three- and five-year outlooks for copper, you can make a pretty strong demand-side story from military industrialization to the AI and energy transition infrastructure. It has a real positive demand outlook and it has got multiple prongs to it, multiple legs to stand on. But you don't see a similar sort of supply pipeline. Now short-term, I think you could have a retracement because market is rallied while Chinese demand has been pretty, pretty poor. We've seen inventories rebuilding. We've looked through that from a price standpoint. So I think there's some risk of retrace. But I think over a three and five year horizon. It is hard to see how some of these base metals meet the forward demand outlooks.

Ryan Blute: Interesting. Okay, well great. Thank you, Greg. It's been really nice talking with you today. Hopefully enjoyable for our listeners as well. Lots happening in the world of commodities, and I'm sure one of the nice things about working in this sector is there's always volatility somewhere in everything that you focus on.

Greg Sharenow: Yeah, I mean that's nice and sometimes not so nice, you know we like quiet nights at home but commodities have been very interesting for reasons that I think are going to endure and are an opportunity set for investors to really think about portfolio construction.

Ryan Blute: Well, thank you very much.

Greg Sharenow: Thank you.

Voice-over: Thanks for joining us on Fixing Your Interest as we explored the forces shaping global commodities markets - highlighting how they continue to evolve amid macro uncertainty, technological change and structural supply constraints.

Stay with us as we continue to navigate the challenges and opportunities across the investment landscape. For deeper insights, analysis and resources, visit PIMCO.com.