Saxo Bank: Market Rotation in 2026 Highlights the Diversified Value of Commodity Allocation

FX168 Financial News, October 31— Ole Hansen, Head of Commodity Strategy at Saxo Bank, stated that the surge in energy prices and the decline in precious metals prices in 2026 demonstrate the necessity of diversifying within the commodity sector, rather than simply betting on individual winners or losers.

Ole Hansen, Head of Commodity Strategy at Saxo Bank, stated that the surge in energy prices and the decline in precious metals prices in 2026 demonstrate the necessity of diversifying within the commodity sector, rather than simply betting on individual winners or losers.



Hansen noted that disruptive price swings occurred in the commodity market this month.

"The Bloomberg Commodity Total Return Index (BCOMTR), which tracks a diversified basket of 25 major commodity futures, including energy, metals, and agriculture, was nearly flat in October," he said. "However, beneath the static overall performance, there was significant sector rotation: the energy segment saw a sharp rise, soft commodities also gained, grains and precious metals declined, while industrial metals weakened modestly."

Hansen pointed out that heightened tensions in the Middle East, supply disruptions, and rising risk premiums propelled the energy sector to outperform this month. "Brent crude and West Texas Intermediate led the gains in energy, and US diesel also strengthened. Tight inventories, constrained export supply, and delayed refinery maintenance further intensified concerns over supply." In contrast, the performance of the agriculture sector was mixed.



Hansen mentioned: "Precious metals have experienced strong reversals. Silver and platinum were the biggest losers in October, with gold also weakening. Surging bond yields and shifting expectations around interest rates have raised the opportunity cost of holding these non-yielding assets, which placed further pressure on precious metals. Additionally, concerns over global economic growth and the sustainability of AI-related investments hit silver and platinum even harder due to their significant industrial demand characteristics."

He added: "Following the previous rally, speculative positions in the market were high, amplifying the current pullback; technical breakdowns also triggered liquidation of long positions, causing trend-driven selling pressure."



Discussing industrial metals, Hansen said that despite market concerns over an economic slowdown, weakening demand from China, and uncertainty around US trade policy, the sector remained relatively resilient. "Copper prices, in particular, have been influenced by rising exchange inventories and speculation that the US may impose tariffs on refined metal imports; however, long-term demand expectations from electrification and infrastructure investment continue to provide a certain floor for copper prices."



"Compared with last year, the sector rotation in commodities this year is particularly startling," Hansen said. "Precious metals led the commodities sector in 2025, up by around 80%; yet in 2026, they rank at the bottom, currently down about 11% year-to-date. In contrast, the energy sector was down about 10% last year, but galvanized by supply disruptions from war and surging oil and refined fuels prices, it is up nearly 100% so far this year."



Hansen remarked that such sharp rotations in the commodities space "further underscore the need to broadly allocate across commodities, rather than confining to a few types. While diversification cannot fully eliminate the risk of losses for the entire asset class, it can buffer against the impact of dramatic reversals in any single sector."

He concluded: "The key lesson for 2026 is that commodities rarely move in sync. War is reshaping energy markets; weather and crop cycles drive agriculture; inflation, bond yields, growth expectations, and speculative positioning spur large swings in metals prices. These driving factors are likely to continue playing a major role—and sector rotation may prove as important as the market’s overall trend."