How to Invest in Commodities & Resources

By Matt Haycox, founder of Alternative Fortune, entrepreneur and investor. Last reviewed: July 2026. This is general information, not financial advice.

Key takeaways

• Commodities are raw physical inputs, priced by supply and demand rather than company earnings, and held mainly to diversify a portfolio and hedge inflation.
• Their long-run return sits below shares and property, so they earn their place through low correlation with equities and bonds, not through headline growth.
• Most investors access them up a ladder of wrappers, from cheap physically-backed ETCs to miner-equity ETFs, futures funds and direct bullion, and the wrapper drives cost, tax and behaviour more than the metal does.
• The main risks are no income, chronic underperformance through disinflation, contango drag in futures funds, and single-name concentration inside miner ETFs.
• They suit an investor comfortable with a non-income asset that can trade sideways for years, not one chasing maximum long-run growth or needing regular income.

What commodities and resources are as an investment

Commodities are the raw inputs the rest of the economy is built from: the metals in a circuit board, the fuel in a tank, the grain in a loaf. As an asset class they behave differently from the companies that use them. You are not buying a business with earnings and a management team. You are buying exposure to a price set by supply, demand and, increasingly, geopolitics.

The scale is enormous. On an aggregate-transaction basis, the total commodities market is projected to reach roughly US$149.02tn by 2030, growing at a 2.41% compound annual rate from 2026, according to Statista. Treat that as a signal of the category’s reach, not a pot of investable money: it counts flows, not funds under management. The layer where investors actually take positions is the derivatives market, where commodity derivatives notional outstanding exceeded US$4.8tn in 2025, on Business Research Insights figures.

Gold is what draws most people to the category right now. Full-year 2025 total gold demand, including over-the-counter, topped 5,000 tonnes for the first time, worth US$555bn, up 45% year on year, per the World Gold Council. The case for holding commodities, the resource stories inside the category, how an investor actually buys exposure, what the return and demand numbers say, and where the risks sit are all worth taking in turn.

Why commodities are an asset class

The case for commodities is not that they beat shares. Over the long run they do not. Across the full 125-year record from 1900 to 2024, global equities returned 5.2% a year in real terms, against 1.7% for bonds and 0.5% for bills, on the UBS/LBS Yearbook 2025. One 58-year academic sample puts commodities at 6.03% real per year, below real estate at 10.45%, broad equities at 9.76%, non-government bonds at 7.51% and government bonds at 6.66%, per Annual Reviews. If your only question is which asset compounds hardest over decades, commodities are not the answer.

So why hold them at all? Correlation. Commodities have historically shown low correlation with equities, negative correlation with bonds, and a distinctive inflation-hedging quality, per Annual Reviews. They tend to earn their place when the rest of a portfolio is struggling (supply shocks, inflation spikes, currency stress) and to lag badly through extended disinflation. You accept a lower long-run return in exchange for a return stream that behaves differently when the rest of the portfolio is under pressure.

Gold’s recent run is why so many people are looking at commodities at all. Spot gold set 53 new all-time highs in 2025 and hit an intraday record of US$4,689.15/oz on 19 January 2026, reaching roughly US$5,405/oz later that month, per Carbon Credits, with J.P. Morgan Global Research targeting around US$6,000/oz by year-end 2026. A run like that is a demand event, not a law of nature. Gold pays no income, produces nothing, and can trade sideways for a decade. A category whose most prominent asset is a non-yielding store of value works as a diversifier well before it works as a growth engine. Hold it for what it does to the whole portfolio, not for the headline on any single metal.

Where the resources sit

Commodities are not one thing. The forces driving a gold bar and a uranium pellet have almost nothing in common, and an allocation built as if they were interchangeable tends to end up owning the same risk twice. It helps to hold the category apart into the resource stories that move on different drivers.

Precious metals, the monetary demand story. Gold, silver, platinum and palladium sit closest to money and furthest from industry, though silver and the platinum-group metals also carry heavy industrial demand that complicates the picture. This is the central-bank corner. Net official-sector buying ran to 863 tonnes of gold in 2025, with 244 tonnes in Q1 2026 alone, up 3% year on year, per the World Gold Council. A record 45% of reserve managers plan to increase their own gold holdings over the next 12 months, and 89% expect global central-bank holdings to rise.

Base and industrial metals, the electrification story. Copper, aluminium, zinc, nickel and lead are the metals the physical economy is wired and framed with, and their prices track the industrial cycle. Copper is the cleanest expression of the electrification thesis. The IEA warns of a roughly 30% copper supply shortfall by 2035, while S&P Global sees copper demand rising from 28Mt in 2025 to 42Mt by 2040, a 50% increase, with AI data centres alone consuming 250 to 550kt a year by 2030. The supply side is constrained by physics: ore grades are down about 40% since 1991, mine-development timelines now run around 17 years, and only 14 new deposits were found in the past decade against 225 in the prior 23 years, on Crux Investor’s reading.

Critical and battery materials, the supply-chain story. Lithium, cobalt, nickel, graphite and the rare-earth elements sit behind batteries, magnets and defence hardware. Their investment character is defined less by price and more by concentration risk. Much of the mining and almost all of the processing is controlled by a handful of countries, which makes these markets as much a geopolitics trade as a commodity one.

Uranium and the nuclear build-out. Nuclear power is being rehabilitated as a low-carbon baseload answer to electrification and AI-driven grid demand, and uranium is the fuel with a tight, concentrated supply chain. For the reactor pipeline, the fuel-cycle bottleneck and how an investor takes a position, see uranium and the nuclear renaissance.

Energy, the flow commodities. Crude oil, natural gas, refined products like petrol and diesel, and increasingly power itself are consumed rather than stored as wealth, and they move violently on geopolitics, weather and inventory. This is the largest and most liquid corner of the commodity complex, and the one where futures roll and storage economics matter most.

Agriculture and softs. Grains and oilseeds (wheat, corn, soybeans), the softs (coffee, sugar, cocoa, cotton) and livestock trade on harvests, disease and trade policy. Agricultural commodities alone are a US$6,168.58bn market in 2025, forecast to reach US$11,201.04bn by 2033 at a 7.8% compound rate, per DataM Intelligence. Farmland and timberland sit alongside as the land-based way to own the same exposure.

Water. Fresh water is scarce, mispriced and increasingly investable through rights, utilities and infrastructure, and it may be the defining resource constraint of the century. The argument, and how an investor gains exposure, is in our deep dive on water rights.

Carbon. Carbon allowances turn the right to emit into a tradable, policy-driven commodity, a resource created by regulation rather than geology, which makes political risk its dominant variable. How the markets are structured and where the investment case sits is in our deep dive on carbon credits.

How to invest in commodities: the vehicle ladder

There is no single “buy commodities” button. There is a ladder of vehicles running from the most liquid and hands-off to the most operationally involved. Where you stand on it changes your cost, your tax treatment and exactly what you are exposed to.

The top of the ladder is where most investors start. Physically-backed ETCs and trusts hold the actual metal in a vault and track its spot price closely. Miner-equity ETFs buy the companies that dig the commodity up, adding operational leverage and, usually, a dividend, at the cost of equity risk. Futures-based ETFs give exposure without holding anything physical, but they carry roll costs that can eat returns. Below those sit the more specialist routes: streaming and royalty companies, direct bullion and storage, managed-futures and CTA funds, and, at the bottom, direct mining equities, farmland and private resource deals.

Five named, liquid vehicles across the three ETF structures show how much the wrapper, not the commodity, drives cost and behaviour.

Commodities vehicle comparison

Compiled by Alternative Fortune from filings and market data, as at July 2026.

The table shows how much the wrapper shapes the outcome. The fee spread runs about sevenfold across the row, from 0.12% for physical gold to as much as 0.86% all-in for futures oil, and the structure rather than the commodity sets that cost. The physical ETCs pay no yield, while the miner ETFs do, COPX around 2.52% and URNM around 3.30%, because the equity wrapper adds income and operational leverage, and equity risk with them, on stockanalysis.com data. USO shows the risk at the other end: even with oil running hard in early 2026, its short-dated futures must be rolled forward, and in contango that roll chronically drags the fund below spot over long holds, so the fund and the underlying commodity can diverge sharply.

The numbers

Set the return record against the demand signals and the two halves fit together. The long-run returns are modest, but the return stream is genuinely different from shares and bonds, and it is backed by structural demand that is still building.

Compiled by Alternative Fortune from the sources cited, as at July 2026.

The two panels pull against each other. Commodities sit at the bottom of the long-run return table, and yet the demand curve for the metals that matter is still rising steeply. Jeff Currie, former Goldman Sachs global head of commodities research, put the supply side bluntly to Kitco: “None of the imbalances have been resolved. They grow by the day. Own the grains/softs. Own the metals. Own the molecules… Remember, you cannot print molecules.” On the monetary side, the World Gold Council’s Shaokai Fan reads the reserve-manager data the same way: “This year’s survey sends a clear message: central bank demand for gold remains on an upward trajectory.”

Tax and structure: what to ask your adviser

This is not tax advice, and tax rules are jurisdiction-specific. The point below is a structural principle to take to your own adviser, not a rate to assume applies where you live.

With commodities, the wrapper drives the tax outcome more than the metal does. The same silver can be taxed three different ways depending on how you hold it.

The United States shows the mechanism clearly, not because it applies to you, but because its rules draw the distinctions sharply. Physically-backed metal ETFs there, structured as grantor trusts, are taxed as collectibles, with long-term gains capped at a 28% top federal rate versus the roughly 20% top rate on shares, per CNBC. A futures-based commodity ETF is treated differently again: Section 1256 gives it a 60% long-term / 40% short-term split regardless of holding period, on Fidelity guidance, which can produce a lower blended rate than the collectibles treatment. Miner-equity ETFs are taxed as ordinary shares, which is precisely why they sidestep the collectibles trap.

Two questions carry across any jurisdiction. Ask which of the three structural buckets your vehicle sits in (physical-collectible, futures, or equity) because that, more than the commodity, sets your tax. And ask whether holding the same exposure inside a tax-advantaged account can sidestep the headline rate entirely, as CNBC notes a US IRA or a UK ISA or SIPP can. Cross-border holders should also check withholding at source on any miner dividends, which is typically treaty-dependent. Confirm all of it with an adviser who knows your country.

The risks of commodities investment

The category carries risks that shares and bonds do not, and an investor who understands them before buying tends to hold the position more sensibly.

No income and no intrinsic yield. A gold bar generates nothing. Your entire return depends on someone paying more later. The physical ETCs in the table pay no dividend at all, which means holding through a flat decade costs you both the fee and the opportunity.

Disinflation is the enemy. Commodities are an inflation hedge that underperforms badly through extended disinflation, per Annual Reviews. The thing that makes them valuable in a portfolio also makes them a drag in the wrong regime.

Structure risk in futures vehicles. Contango can quietly gut a futures fund. USO must roll its short-dated contracts forward, and that roll drags it below spot over long holds even when the underlying commodity is rising, as its prospectus sets out.

Concentration and single-name risk in miner ETFs. A “diversified” miner fund can lean heavily on one company. URNM’s top holding, Cameco, is around 19.34% of the fund, per its filing. One operational failure at a large holding moves the whole vehicle.

Volatility and geopolitics. Flow commodities move violently on supply shocks and policy. The demand case for copper is strong, but it rests on a supply chain constrained by 17-year development timelines and grades down 40% since 1991, on Crux Investor‘s reading, tightness that cuts both ways.

Common mistakes investors make

• Buying the ticker instead of the exposure. Treating USO as a way to “hold oil” ignores that its futures roll makes it a poor long-term proxy for spot crude.
• Expecting commodities to compound like shares. The long record says otherwise: 6.03% real for commodities against 9.76% for equities, per Annual Reviews. Hold them for correlation, not for the highest return.
• Ignoring the wrapper’s tax treatment. The same metal can be taxed as a collectible, a futures contract or a share, and investors routinely find out only at tax time.
• Chasing a metal after its record run. Gold set 53 all-time highs in 2025; buying purely because it has already moved is buying the headline, not the case.
• Overlooking fees on a low-return asset. A sevenfold fee spread across otherwise similar vehicles matters far more when the underlying return is modest.

Who this suits

Commodities suit an investor who already understands why they are holding them: to diversify a portfolio, hedge inflation and add a return stream that does not move in lockstep with shares and bonds. They suit someone comfortable with a non-income asset that can trade sideways for years, and with volatility driven by supply shocks and geopolitics rather than earnings.

They suit less well an investor whose goal is maximum long-run growth from a single sleeve, since the return record does not support that on the Annual Reviews sample, or anyone who needs regular income, given the physical vehicles pay none. As with any allocation, the right size is a personal decision for you and your adviser, not a figure to lift from a general guide.

Frequently asked questions

How do you invest in commodities? Through a ladder of vehicles: physically-backed ETCs that hold the metal, miner-equity ETFs that hold the companies, futures-based ETFs, and more specialist routes like bullion, royalty companies and managed-futures funds. Most investors start with a low-cost physical ETC or a miner ETF; each carries different cost, tax and behaviour.

Commodities vs stocks, which performs better? Over the long run, shares. Global equities returned 5.2% a year in real terms across 1900 to 2024, and one 58-year sample puts commodities at 6.03% real against equities at 9.76%, per Annual Reviews. The point of commodities is not to beat shares but to behave differently from them.

Are commodities a good investment? They are a good diversifier and inflation hedge, not a growth engine. Their value comes from low correlation with equities and negative correlation with bonds, per Annual Reviews, which helps when the rest of a portfolio struggles, but they lag through extended disinflation.

Why invest in commodities now, and how do you invest in gold? The demand case is structural: record central-bank gold buying of 863 tonnes in 2025, per the World Gold Council, and copper demand rising 50% by 2040. For gold specifically, the cheapest route in the table is a physically-backed ETC at 0.12%, which tracks the spot price closely without you storing metal.

How do you invest in uranium? The most accessible route is a miner-equity ETF such as Sprott Uranium Miners, which holds around 30 uranium-mining companies and gives operational exposure to the nuclear build-out. For the full fuel-cycle picture and the range of vehicles, see the deep dive on uranium and the nuclear renaissance.