(Kitco News) - Gold’s disappointing performance in recent months is further proof that it is not a reliable inflation hedge, and while it remains an important diversification tool, one fund manager says investors should be looking at broad-based exposure to commodities as the global economy enters what could be a generational supercycle.
In an interview with Kitco News, Tim Pickering, President and CIO of Auspice Capital Advisors, said that while he personally likes gold and silver, he would not be investing in the precious metals at this time, as persistent inflation and elevated interest rates continue to create significant headwinds.
Pickering explained that gold's biggest weakness as an inflation hedge is that it can become a rate-sensitive investment precisely when consumers are facing rising prices. He noted that this is not the first time gold has been a disappointing inflation hedge. He pointed out that gold struggled between 2020 and 2022, even as U.S. inflation surged to a four-decade high of 9%.
"Gold's not a panacea. It's just a diversifier," he said.
Pickering argued that investors need to distinguish between assets that react to inflation and those that actually drive it. While gold can benefit from monetary uncertainty and changing investor sentiment, energy, industrial metals and agricultural commodities are direct inputs into the global economy.
"Commodities are a source of inflation, not a reaction to it," he said.
The distinction is becoming increasingly important as oil prices continue to trade around $100 a barrel and central banks struggle to contain inflation without damaging economic growth.
Pickering explained that central banks can use higher interest rates to reduce demand-driven inflation, but monetary policy is much less effective at addressing rising production costs caused by higher energy prices, wages and raw materials.
He added that investors should prepare for inflation to remain structurally higher than the unusually low levels seen in the decade following the 2008 financial crisis.
"People need to accept that we're in a world where that type of inflation is normal," he said, referring to annual inflation around 3% to 4%.
Although Pickering remains fundamentally bullish on commodities, including precious metals, he emphasized that investment decisions should ultimately be driven by price trends rather than economic forecasts.
Auspice's broad commodity strategy, which tracks 12 markets, currently holds long positions in nine commodities. Gold, silver and North American natural gas are the three markets without long exposure.
The portfolio instead holds positions in petroleum products, copper, corn, soybeans, wheat, cotton and sugar.
Pickering said the strategy's lack of precious metals exposure reflects their weak price performance rather than a fundamental rejection of either asset.
"I love the fundamentals of silver," he said, adding that he is more optimistic about silver's underlying supply-and-demand outlook than gold's.
"That doesn't mean I'm going to be long. If it's going down all year, my job is to either protect your capital or make you money on the short side."
Pickering noted that Auspice had already been aggressively reducing its silver exposure toward the end of 2025, as the metal's historic rally drove volatility sharply higher. By the time silver peaked in January, the firm had effectively exited its position.
As for what would bring the firm back into gold and silver, Pickering said the answer is relatively straightforward: sustained positive price momentum.
"I'm never going to pick a bottom," he said. "We look for momentum."
He explained that Auspice generally looks for a trend to develop over several months before establishing a position, with exposure adjusted according to volatility and relative portfolio risk.
While gold and silver remain under pressure, Pickering said investors should not confuse weakness in individual markets with the end of the broader commodity bull market.
In fact, he believes the world is only in the early stages of a commodity supercycle that could last more than two decades.
"I think we're six years into a 20-plus-year cycle," he said. "We're in a supercycle, in my opinion."
Pickering identified three structural drivers supporting his long-term outlook: growing consumption from emerging-market middle classes, the global energy transition and rapidly expanding demand for artificial intelligence infrastructure and data centers.
He explained that these forces are creating sustained demand for energy, industrial metals and agricultural products at a time when investment in new commodity production has failed to keep pace.
Unlike the commodity boom of the early 2000s, which was largely driven by China's industrialization, Pickering said the current cycle has several powerful demand catalysts operating simultaneously.
"Now you're in a situation where there isn't one catalyst, there's like three core massive catalysts," he said.
Geopolitical instability and supply-chain disruptions are creating additional pressure on already constrained commodity markets, he explained.
Pickering pointed to the conflict surrounding the Strait of Hormuz as an example of how inflationary pressures can spread across the commodity complex.
While the immediate impact has been higher energy prices, he warned that disruptions to fertilizer supplies could eventually affect agricultural production and food prices.
He said farmers may have already secured their fertilizer requirements for this year's growing season, but higher costs could become a much bigger concern in 2027.
These developments help explain why Pickering expects investment capital to continue rotating between different commodity markets rather than concentrating in a single asset.
He noted that money initially flowed into grains at the beginning of the year before shifting toward energy as geopolitical tensions intensified. As energy prices corrected during the summer, investment interest returned to agricultural commodities.
For investors, Pickering said this rotation reinforces the importance of maintaining diversified exposure rather than trying to identify the next gold, silver or oil rally.
The firm's systematic approach uses three primary factors: price trends, volatility-based position sizing, and the structure of commodity futures curves.
Although gold has struggled in the current environment, Pickering said that higher interest rates could create an unexpected source of support for the commodity supercycle, despite their near-term impact on precious metals.
Pickering explained that commodity producers are increasingly competing with technology companies and AI infrastructure developers for investment capital. As borrowing costs rise, mining and energy companies may struggle to finance the production capacity needed to satisfy future demand.
"Structurally higher interest rates is not helping this problem," he said. "It's exacerbating it significantly, in my opinion."
He added that a stronger U.S. dollar does not necessarily prevent commodities from performing well, even though most raw materials are priced in dollars.(Kitco Global Index shows how much of today's gold move is the dollar versus the gold market itself.)
Meanwhile, Pickering sees the traditional 60/40 portfolio of equities and bonds facing new challenges as persistent inflation weakens the diversification benefits of fixed income.
He said the simultaneous decline in stocks and bonds during 2022 demonstrated why investors should consider alternatives that behave differently from traditional financial assets.
He explained that this is also the philosophy behind Direxion's recently launched U.S. 500 Plus ETF (SPXP), which tracks an index developed by Auspice. The fund combines S&P 500 exposure with a managed-futures strategy spanning commodities, currencies and interest rates.
Pickering explained that the strategy uses capital-efficient futures contracts to maintain equity exposure while adding a separate source of potential diversification through commodities, rather than requiring investors to sell existing stock holdings to make room for alternatives.
Ultimately, Pickering said he does not expect central banks to aggressively raise interest rates to the point of triggering a severe recession simply to return inflation to their traditional targets.
He believes policymakers will increasingly have to accept somewhat higher inflation rather than risk significant economic damage from attempts to control supply-driven price pressures. He noted that although the global economy has gotten used to low inflation since the 2008 Great Financial Crisis, inflation since the 1970s has averaged around 4%.
"You're not afraid of normal inflation," he said. "You're afraid of stagflation."
Although the risk of a recession remains, Pickering said the combination of resilient demand, years of underinvestment and structural growth in commodity consumption should continue to support the broader market.
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