Merryn Talks Money — "Why Investors Are Rotating Into Commodities"

Host: Merryn Somerset Webb (Bloomberg)
Guest: Evy Hambro (Global Head of Thematic and Sector Investing, BlackRock)
Date: March 30, 2026

Episode Overview

In this episode, host Merryn Somerset Webb invites back Evy Hambro of BlackRock to dissect the sudden shifts in commodity markets—particularly gold, silver, and energy—in the context of recent geopolitical turmoil and evolving investment themes. The conversation unpacks why traditionally “safe” assets haven’t provided the expected hedge, explores the new realities of energy investing, and offers insight into how portfolios should be adapting to these changes.

Key Discussion Points & Insights

1. Gold’s Volatility and Investor Behavior

[02:12–10:24]

• Surprising Gold Allocations: A significant number of investors now carry high percentages of their portfolios in gold (some 15–30%, with a few at 50%), far above the typical 2–5% range recommended by wealth managers.
  • "When I got to 50% of the portfolio, there was still two people with their hands up."
    – Merryn [03:10]
• Gold’s Recent Performance: Despite heightened geopolitical risk (the Iran war), gold and silver have not been the expected stabilizers. Both have exhibited greater volatility, with gold seeing sharp drawdowns.
  • “Gold and silver have both behaved like volatile financial instruments and they haven’t done the job that I think a lot of people would have expected them to do.”
    – Merryn [03:11]
• Explanations Offered for Gold’s Behavior:
  • Investors’ initial response to crises is a “rush for cash,” leading to widespread selling—even of traditional hedges. [03:52]
  • Previous commodity allocations have shifted away from metals into energy (oil and gas) in response to new risk factors.
  • Central banks likely aren’t reducing gold purchases; instead, some emerging market countries may be selling to cover economic shortfalls, but this is not gold-specific. [09:11]
  • Leverage and increased use of financial instruments (ETFs, margin) amplify volatility and prompt swift reversals during corrections.
    • “People would have been having a 5% weighting and then borrowing 2.5% against it, taking it to 7.5…that financial leverage would up the exposure.”
      – Evy [08:03]
  • Profit-taking after outsized run-ups.

2. The Evolving Role of Central Banks and Market Structure

[08:45–10:39]

• Central banks, especially those building toward target gold reserves, might use price weakness as a buying opportunity.
• Middle Eastern economies may sell liquid assets, including gold, to raise capital amidst economic and travel disruptions.

3. Energy’s Shrinking Portfolio Presence and the Case for Rotation

[12:43–15:14]

• Underweight Energy: Energy represents a minuscule share of market cap relative to its indispensable role in global GDP (~3% of global market cap, lower in the US).
• Rebalancing Required: The gulf between energy’s economic importance and its share in investment portfolios suggests rotation into energy and other ‘hard assets’ is logical and underway.
  • “There is likely to be this rotation of capital back towards areas that are geopolitically important, industrially important, and the backbones of the global economy.”
    – Evy [13:03]

4. Material vs. Ethereal: Wake-Up Call for Investors

[15:14–16:55]

• Ed Conway Reference: Markets waking up to the difference between the digital (ethereal) economy and material, real-world needs (“cash for energy is no longer just a given”).
• The Ukraine war was the first siren; Middle East events have amplified awareness.
• Complacency Highlighted: Declining investment and profitability in essential sectors (agricultural inputs, fertilizers, helium, etc.) have left supply chains fragile.

5. Commodity Cycles, 'Supercycles,' and Capex

[20:05–21:13]

• Hambro is reluctant to use “supercycle,” instead seeing a capex-driven cycle in essential materials (copper, gold, aluminium) with underinvestment and demand mismatches as key drivers.
• “We’re definitely at the foothills of a cycle now. ... The sector trades on low multiples and is completely out of balance relative to its geopolitical significance.”
  – Evy [20:25]
• Risks include potential pauses if equity prices crash, but overall he expects a prolonged upturn.

6. Energy Transition: Slowdown or “All of the Above”?

[21:13–23:24]

• Debate: Should geopolitical risk accelerate the energy transition, or will it force a slowdown and reliance on fossil fuels?
• Hambro argues for a blended approach:
  • “I actually think the answer is the third scenario, which is all of the above. ... Fossil fuels can’t meet demand alone, renewables can’t either, and you can’t build nuclear fast enough. It’s going to be an all of the above answer.”
    – Evy [21:56]

7. Coal’s Unexpected Resurgence

[23:17–24:17]

• Some coal exposure in portfolios via diversified miners, but little pure-play coal. Recent events show coal may be needed longer than anticipated.

8. Portfolio Construction: How Much Should Be in Commodities?

[24:17–28:00]

• Hambro’s personal allocation: ~20% in gold equities (currently 30% due to recent outperformance), a figure much higher than typical clients.
  • “Like all professional fund managers, they’re really bad at running their own money. ... I haven’t rebalanced.”
    – Evy [25:21]
• Typical client allocations: 2–5% in gold, more in gold equities for higher beta.
• Broader commodity/industrial equities: low single digits, increasing as investors recognize the significance.
  • “If it matches the shape of the global economy it’s going to be high single digits. ... I would have thought 5% somewhere in there, 4 or 5% would be a decent number.”
    – Evy [27:33]
• Key advice: Ensure allocations to gold and commodities don’t overlap (double-count).

9. Valuations, Dividends, and the Miners

[28:00–29:22]

• Big diversified miners remain at a discount to their historical multiples and the broader market.
• Dividends have lagged but should rebound with sustained high commodity prices.
  • “The only metric that looks a little bit expensive today is yield, but that’s because it’s less lagging the payments.”
    – Evy [28:10]
• Emphasizes the discipline dividends provide management.

10. Digital Assets: Bitcoin, Stablecoins, and the Future of Payments

[29:37–33:24]

• Hambro remains unconvinced by Bitcoin as a store of value but is positive about stablecoins for cross-border transactions and digitization of money.
  • “I’m a big believer in what has been achieved by some of the stablecoin companies... it’s actually a really great tool for society.”
    – Evy [29:51]
• Envisions a world where people spend tokenized ETFs/equities directly.
• Argues that stablecoins “do the job Bitcoin was supposed to do, but without the volatility.”

11. AI, Hyperscalers, and Commodities Demand

[33:24–36:27]

• Even if current AI models hit scaling limits, the infrastructure buildout for data centers and energy demand has years to run. The AI “arms race” is only accelerating commodity and energy needs.
  • “All I can reference is what I’ve read and consumed and started to understand. ... The AI arms race is today ... it’s not about chips, it’s about power and property, and that’s everything we’ve spoken about in relation to rising energy demand and materials consumption.”
    – Evy [34:15]

12. Memorable Quotes and Light Moments

• “For some parts of the economy, I think it’s exciting. For other parts, I think it’s very scary—for employment, for society, for government tax receipts.”
  – Evy [36:30]

• “Luckily, you can hedge all those downsides by holding a nice portfolio of copper, tin and zinc.”
  – Merryn [36:59]

• On what he’s reading: “My daughter is likely to be performing in Cold Comfort Farm, and I’ve never read Cold Comfort Farm. ... So that is definitely on my list.”
  – Evy [37:13]

Timestamps for Key Segments

• Introduction & Gold Allocations: [01:57–03:10]
• What’s Going on with Gold? [03:10–07:23]
• Gold Market Structure & Central Banks: [08:03–10:24]
• Energy’s Portfolio Role & Sector Rotation: [12:43–15:14]
• Complacency in Material Supply Chains: [15:14–16:55]
• Commodity Cycle (Not Supercycle): [20:05–21:13]
• Energy Transition Debate: [21:13–23:24]
• Coal Exposure: [23:17–24:17]
• Portfolio Construction Advice: [24:17–28:00]
• Valuations & Dividends: [28:00–29:22]
• Digital Assets/Stablecoins vs. Bitcoin: [29:37–33:24]
• AI, Hyperscalers & Future Demand: [33:24–36:27]
• Final Thoughts & Reading Corner: [37:07–37:41]

Tone & Style

The conversation is relaxed yet highly analytical, blending expert insight with witty asides, particularly regarding investors' foibles and shifting market dogmas.

Summary Takeaways

• Commodities (especially energy, precious metals, and industrial materials) are underrepresented in many portfolios given their real-world importance.
• Gold’s recent volatility is the result of financialization, leverage, profit taking, and capital rotation into energy, rather than a simple failure of gold as a hedge.
• Investor complacency about the security of supply for physical goods and materials is being unmasked by geopolitical shocks.
• A sustainable, diversified commodities allocation (gold, energy, and materials-related equities) should be larger than in the past—perhaps 10–15% altogether.
• AI and digitization are creating persistent new sources of demand for key commodities.
• Stablecoins are practical digital assets; Bitcoin is losing its unique narrative as a transactional tool.
• Portfolios should be built with rising real asset requirements and structural inflation in mind.

This summary enables investors of all experience levels to grasp why commodities are resurging as a core asset class, how the current environment differs from past cycles, and what practical shifts might make sense in portfolio construction today.