(Kitco News) - A shift in the global economic order is triggering a worldwide race for physical resources, creating the conditions for a sustained commodity bull market and reinforcing gold's role as a critical reserve asset, according to two leaders in global financial markets.
Speaking at the Sohn Montreal Conference, Bridgewater Associates Co-Chief Investment Officer Karen Karniol-Tambour and Gavekal CEO Louis-Vincent Gave largely agreed that the world is moving away from decades of globalization toward a new era defined by geopolitical competition, strategic resource hoarding, and structurally higher inflation.
The transition, they said, has profound implications for investors accustomed to the disinflationary environment that dominated markets for much of the past 30 years.
Karniol-Tambour described the current environment as a shift toward "modern mercantilism," where nations are increasingly prioritizing national resilience and security over economic efficiency.
She said that the risk in this environment is that “any vulnerability that you have in any topic can be weaponized."
The result is a global effort by governments to secure critical supply chains, industrial capacity, energy infrastructure, and strategic commodities.
"It's really a grab for stuff," Karniol-Tambour said. "You need to get all the commodities you need, the rare earths that you need. You need defense to work. You need a lot of things."
That scramble is occurring simultaneously with the massive buildout of artificial intelligence infrastructure, which is creating unprecedented demand for energy, electricity transmission, and industrial metals.
"It's a much more inflationary world where you need lots of physical things as quickly as possible," she said.
At the same time, Gave said that inflationary pressures extend beyond geopolitics and technology. He explained that deteriorating demographics across developed economies, rising fiscal deficits, and growing government spending commitments are additional drivers of long-term inflation.
"The reality is we now live in a more inflationary world," he said.
According to Gave, that shift is undermining one of the foundational assumptions of modern portfolio construction: that government bonds provide reliable protection during market stress.
"For thirty years we could accept that bonds were the natural diversification for equities," he said. "It no longer is."
He noted that in recent market shocks, including inflation-driven selloffs, both stocks and bonds have declined together, leaving investors without the traditional protection offered by fixed income.
The panelists acknowledged that rising inflation risks and growing fiscal demands are likely to keep pressure on global bond markets.
Karniol-Tambour said governments face enormous spending requirements as they attempt to rebuild supply chains, expand domestic manufacturing, secure strategic resources, and fund defense initiatives.
"The structural cost of capital just has to go up," she said. "How could the cost of capital not be rising in a world where we need to do not efficiency, but where government has to spend, in a world we have to build all these things?"
Gave believes the changing geopolitical landscape is also altering how countries think about reserves and financial security.
For decades, governments accumulated U.S. Treasuries because they were viewed as the ultimate liquid asset that could be converted into whatever commodity or resource a country needed during a crisis. However, the freezing of Russian reserves following the invasion of Ukraine caused many governments to reassess that assumption.
He said that U.S. hegemony is broken and that nations are trading their U.S. Treasuries for commodities.
"We are rapidly shifting into a world where the U.S. Treasury was the very backbone against which everything was built, to now we're going to move to where it's commodities," Gave said.
Rather than relying solely on financial assets, countries are increasingly seeking strategic reserves of oil, fertilizer, agricultural products, and industrial materials.
That trend, Gave added, will absorb global liquidity and reinforce inflationary pressures across commodity markets.
Looking specifically at opportunities created by the AI boom, Gave said investors may be focusing on the wrong bottlenecks.
While much of the market's attention has been directed toward semiconductors, he believes the more durable shortages will emerge in power generation and electrical infrastructure.
"The shortages will be in the electricity, in the generation, in our ability to feed all these data centers," he said. "That means copper, that means aluminum, that means silver, and that means more solar panels."
As a result, he said he would rather own commodities than semiconductor stocks at current valuations.
The bullish outlook for commodities was echoed in the panel's closing discussion on their highest-conviction investment ideas for the next three years.
Karniol-Tambour singled out gold as her preferred commodity holding.
"It just feels that there's so much uncertainty," she said. "There's just structurally more demand for gold."
She said that geopolitical fragmentation and concerns over reserve security are forcing governments, institutions, and investors to reconsider where they store wealth.
Gave largely agreed with the bullish case for gold but identified copper as his highest-conviction commodity trade, citing the enormous investment required to expand electricity grids and energy infrastructure.
"I still think copper goes a lot higher," he said. "Everybody's saying, 'I need to rebuild my electricity grid. I need to put in more solar panels. I need to become more resilient.' A lot of that is very hard to do without copper."
For more than 30 years, the Sohn Conference Foundation has raised money for pediatric healthcare and cancer research. This was the foundation's second annual conference in Canada, and the one-day event raised $1.4 million for the Montreal Children’s Hospital and Sainte-Justine Hospital.
