While 2025’s market performance has been mostly highlighted by large-cap growth equities benefiting from the theme of artificial intelligence (AI), investors might be overlooking one key ingredient in their portfolios: commodities.
In a year defined by macroeconomic headwinds, tariffs, and geopolitical uncertainty, commodities have emerged as strong performers. This asset class has also benefited from the ongoing expansion of AI, which depends on robust infrastructure built from key natural resources.
Given this potential upside for commodities and natural resources, investors should consider positioning their portfolios in equities that can capture these future growth prospects. However, given the myriad challenges that investing in commodities present, it could be beneficial to tap into the expertise of a portfolio manager that can deftly navigate the commodities market. This can be available via an actively managed fund like the Xtrackers RREEF Global Natural Resources ETF (NRES).
Taylor Smith, CFA, CESGA, co-head of Commodities and Natural Resources at DWS, joined TMX VettaFi to discuss the current state of natural resource investing, and how they make for a strong investment case in today’s and tomorrow’s market environment. Lastly, he explains why the fund he manages, NRES, is a potential solution for natural resources exposure.
Commodities have been performing well lately, despite the concerns over the U.S. unleashing an unprecedented number of tariffs, especially for Chinese goods. What do you think are key drivers for their performance?
Despite heightened trade tensions and the U.S. imposing historically high tariffs on Chinese goods, commodities have demonstrated notable resilience. One key driver is monetary policy expectations: Markets are increasingly pricing in Federal Reserve rate cuts as inflation moderates and growth concerns persist. Lower rates typically weaken the dollar, making dollar-denominated commodities more attractive globally, and supporting demand across energy, agricultural, and metals markets. At the same time, China’s macro outlook has improved relative to earlier fears. Growth estimates for 2025 have stabilized near the 5% target, aided by a recent U.S.-China trade truce and targeted stimulus measures, which have bolstered manufacturing and export competitiveness despite tariff risks.
In energy markets, oil has faced downward pressure from OPEC’s decision to gradually increase output and reclaim market share, contributing to a supply-heavy backdrop. However, geopolitical risks remain a bullish counterweight: Renewed US sanctions on Russian oil companies, coupled with chronic instability in Venezuela and Nigeria, underscore the fragility of global energy supply chains. Copper markets tell a different story — tightness is acute. A series of disruptions at major mines, including Grasberg in Indonesia and El Teniente in Chile, has created one of the largest supply deficits in over a decade, pushing prices toward record highs. Analysts now forecast deficits could exceed 400,000 tons in 2026, with electrification and AI-driven infrastructure adding structural demand pressure.
Gold continues to shine as a strategic hedge. Central banks have been aggressive buyers, adding hundreds of tons in recent quarters as part of a broader de-dollarization trend and reserve diversification strategy. Gold recently overtook U.S. Treasuries as a percentage of global central bank reserves. This official-sector demand — largely price insensitive — reflects concerns over currency weaponization and persistent inflation risk, reinforcing gold’s role as a store of value in a multipolar monetary system. Combined with a weaker dollar and elevated geopolitical uncertainty, these dynamics have supported gold prices above $4,000 per ounce, and could sustain strength well into next year. In short, while tariffs have introduced volatility, the interplay of monetary policy, supply constraints, and strategic reserve shifts continues to underpin commodity performance across sectors.
And now that brings us to commodity-related equities — natural resource companies involved in the production of commodities. What do you think have been the key drivers of their performance this year?
Commodity-related equities have posted strong relative performance this year, and the drivers go beyond simple price moves. First, inflation stickiness and monetary policy expectations have been critical. With U.S. inflation hovering near 3% and the Federal Reserve signaling rate cuts, investors have rotated into real assets as an inflation hedge. Historically, resource equities outperform during periods of elevated inflation because they offer tangible exposure to underlying commodities, which tend to appreciate when real rates decline. This macro backdrop has coincided with a weaker dollar, amplifying global demand for metals and energy producers.
Gold producers have been standout performers, buoyed by record-high gold prices above $4,000 per ounce and exceptional third-quarter results. Newmont, the world’s largest gold miner, reported record free cash flow of $1.6 billion in Q3, marking the fourth consecutive quarter above $1 billion. The company also returned $832 million to shareholders through buybacks and dividends, while maintaining cost discipline and reducing debt. This is a notable change in the industry; historically gold miners have failed to capture higher margins due to rising gold prices because of elevated cost inflation. However, in this cycle, costs have remained relatively subdued with inputs like energy, equipment, and labor easing on a sequential basis. These results underscore the sector’s ability to translate strong commodity pricing into robust financial performance and shareholder returns.
In the energy space, refiners have enjoyed a profitability renaissance, driven by global supply disruptions stemming from Ukrainian drone strikes on Russian refining assets and new Western sanctions. These events have removed up to 17–20% of Russia’s refining capacity, tightening global product markets and pushing crack spreads for diesel and gasoline to multi-year highs. Integrated majors with large refining footprints — such as Exxon and Shell — posted refining profit gains exceeding 30% quarter-on-quarter, underscoring the sector’s resilience and geopolitical leverage.
Copper equities are trading at a scarcity premium, reflecting structural deficits and electrification-driven demand. The proposed merger of Anglo American and Teck Resources to form “Anglo Teck” — a top-five global copper producer with over 70% copper exposure — highlights the strategic imperative to secure scale and optionality in a constrained supply environment. This consolidation trend, coupled with rising M&A activity across the base metals space, signals confidence in long-term copper fundamentals. Meanwhile, shareholder activism in the energy sector remains elevated, with campaigns targeting capital discipline, portfolio decarbonization, and governance reforms. Activists have successfully secured board seats and influenced strategic pivots, reinforcing the pressure on companies to balance returns with transition commitments.
Now we’re going to get back to the topic of tariffs, as we have seen them cause significant shifts in global trade. How do you see the new tariff regime impacting commodities and natural resources going forward?
The new tariff regime is not a cyclical irritant — it’s a structural pivot. What we are witnessing is a managed decoupling between the U.S. and China, a deliberate reconfiguration of global supply chains that will define the next decade of trade and capital flows. Tariffs are the policy instrument of choice, but the objective is strategic: to reduce dependency on adversarial nations for critical inputs — energy, metals, agricultural commodities — and to re-anchor production within trusted blocs. This is not merely globalization in reverse, but globalization under new terms, where security and resilience trump efficiency.
For energy, this means a renaissance of North American infrastructure and refining capacity, as Western economies prioritize secure supply chains over lowest-cost sourcing. LNG terminals, pipelines, and refining assets become geopolitical assets, not just industrial ones.
For metals, tariffs accelerate the localization of critical mineral supply chains (copper, nickel, lithium, rare earths, etc.) driving investment into domestic mining and recycling while incentivizing strategic stockpiling. Scarcity premiums will rise as capital chases assets in “friendly” jurisdictions, reinforcing the M&A wave we’ve already seen in copper and battery metals.
For agriculture, tariffs and export controls are reshaping global grain flows. Up until recently, China did not purchase any U.S. soybeans this year, which marks an unprecedented shift in grain supply chains.
The secular implication? Bullish for commodities and natural resources equities. A world of fragmented trade and strategic autonomy is a world of higher friction, higher costs, and higher strategic inventories — all of which support commodity prices structurally. Capital will flow toward companies that can deliver secure supply, optionality across jurisdictions, and operational resilience. In short, tariffs are not just a tax, they are the blueprint for a new commodity order, where geopolitics and resource security become the dominant investment theses of the next decade.
You mentioned relationships between countries. This brings up the risk of geopolitical tensions across different parts of the world. How do natural resource companies navigate the global marketplace given these considerable challenges?
Natural resource companies operate in an environment where geopolitics increasingly shapes trade flows, pricing power, and strategic decisions. One of the most significant developments is China’s push to settle iron ore transactions in yuan, a move that not only reduces reliance on the U.S. dollar but signals Beijing’s long-term ambition to expand RMB-based commodity trade. This shift introduces new foreign exchange considerations for global miners and underscores the growing fragmentation of commodity pricing systems.
Energy markets are equally impacted by geopolitics. Russia continues to export oil, but sanctions are tightening around its logistics and financing channels, gradually reshaping global flows. At the same time, Ukrainian drone strikes on Russian refining assets have disabled key facilities, removing significant volumes of diesel and gasoline from the market. These disruptions have widened crack spreads and created a profitability tailwind for refiners with flexible configurations and access to non-Russian crude. Companies positioned in regions with secure infrastructure — such as US Gulf Coast refiners — are capitalizing on this arbitrage.
Active managers who understand these dynamics can identify companies that not only withstand geopolitical shocks, but turn them into competitive advantages — whether through currency hedging, refining flexibility, or strategic partnerships in emerging markets.
It’s hard to mention the markets without mentioning AI. As we know, AI disruption in the markets is happening on a large scale. How do you see commodities and natural resource equities playing a role in this AI takeover?
The rapid adoption of artificial intelligence is transforming industries, but it’s also reshaping the physical economy. AI is now more accessible than ever, driving exponential growth in data centers worldwide. These facilities don’t power themselves — they require massive amounts of electricity, and critically, they need baseload power to ensure uninterrupted operations. This reality limits the role of intermittent renewables and elevates the importance of reliable energy sources such as natural gas and nuclear power. Uranium demand is rising as countries revisit nuclear as a cornerstone of energy security, while natural gas remains the stopgap solution for balancing grids during peak AI-driven loads.
Beyond generation, AI’s supporting infrastructure needs are rippling through the commodity complex. Aluminum is essential for high-voltage power transmission lines, enabling efficient delivery of electricity from generation hubs to data centers. The construction boom tied to hyperscale facilities links AI directly to steel and copper. As an example, Microsoft’s $500 million Chicago data center required 2,177 tons of copper, which equates to ~27 tons per megawatt of applied power capacity. Global data center power capacity is projected to grow from ~77 GW in 2023 to ~334 GW by 2030, implying the need for ~9 million tons of copper to support data center growth through 2030. Not only that, but copper is also needed for grid expansion investments and general electrification efforts.
For investors, the message is clear: The AI revolution isn’t just about software — it’s about hard assets that make it possible. Commodities and natural resources equities are positioned at the intersection of digital growth and physical infrastructure. Companies with exposure to uranium, natural gas, aluminum, and copper stand to benefit from this structural shift.
We’ve already touched upon this subject: AI obviously has a voracious appetite for electricity. But are there any specific sectors within natural resources, especially equities, that are tied to the energy infrastructure buildout?
As data centers proliferate to meet surging computational demand, the energy infrastructure required to power them is creating structural opportunities across multiple commodity sectors:
- Copper: The lifeblood of electrification. Copper is indispensable for high-voltage transmission lines, transformers, and data center wiring. A single hyperscale data center can require thousands of tons of copper, and with global data center capacity projected to quadruple by 2030, copper demand is set to rise sharply — reinforcing the scarcity premium already driving M&A activity in the sector.
- Aluminum: Critical for lightweight, high-voltage transmission infrastructure. As grids expand to deliver baseload power to AI hubs, aluminum demand for conductors and structural components is accelerating, particularly in regions investing heavily in grid modernization.
- Steel: The foundation of hyperscale construction. Every new data center represents millions of square feet of reinforced structures, linking AI growth directly to traditional materials markets.
- Uranium and nuclear power: Baseload reliability is a non-negotiable for AI workloads. Nuclear energy is regaining prominence as countries seek carbon-free, round-the-clock power solutions. Uranium equities are benefiting from renewed reactor buildouts and long-term supply contracts.
- Natural gas: The transitional backbone. While renewables play a role, their intermittency makes them unsuitable for powering AI-driven data centers alone. Natural gas remains the stopgap solution for balancing grids and ensuring reliability during peak loads.
Since commodities and natural resources have already had a strong run, is there a fear of missing out? Is it too late for investors to participate?
Commodities and natural resource equities have delivered strong returns, but the structural drivers behind this performance remain intact. While short-term price appreciation can create a sense of “fear of missing out,” the reality is that multi-year investment cycles in energy and materials are still in their early stages. AI-driven infrastructure, energy transition, and geopolitical realignment are creating demand profiles that extend well beyond the current cycle.
Gold exemplifies this trend. Central banks continue to accumulate reserves as part of a de-dollarization and debasement trade, reinforcing gold’s role as a strategic hedge in a world of currency fragmentation and persistent inflation risk. This official-sector buying is largely price-insensitive, providing a durable floor for bullion while supporting strong free cash flow generation across gold equities.
In energy, supply growth is projected to remain flat beyond 2026, even as global demand rises; driven by industrial activity, AI-related power needs, and emerging market consumption. Years of underinvestment in upstream capacity, combined with geopolitical disruptions, created a structural tightness that favors integrated majors and refiners. These companies are positioned to benefit from widening crack spreads and resilient margins as global product flows adjust to sanctions and infrastructure risks.
For investors, the question isn’t whether commodities have already made a run, it’s whether they understand the long-term themes still unfolding. Our active ETF is designed to capture these opportunities by focusing on companies with strong balance sheets, disciplined capital allocation, and exposure to strategic resources that underpin the next phase of global growth.
Let’s discuss the Xtrackers RREEF Global Natural Resources ETF (NRES). How is NRES designed to capture these unique opportunities in natural resources? And why do you think that active management is the best way to navigate the natural resources space?
The Xtrackers RREEF Global Natural Resources ETF (NRES) is designed to give investors targeted exposure to the companies powering global growth — miners, energy producers, and infrastructure enablers — while leveraging the advantages of active management in one of the most complex sectors of the market.
Why active? Because natural resources require expertise. Natural resources are not just about commodity prices. They’re about capital cycles, geopolitical risk, and structural demand shifts. Our team brings deep expertise in both equities and commodities, a dual perspective that allows us to understand the full value chain. We perform fundamental, bottom-up research and rigorous due diligence across sectors, evaluating assets, balance sheets, and management strategies with precision.
We are experts in valuation work in highly cyclical industries, a lost art in today’s market. Understanding where we are in the capital cycle is critical: Commodities are depletive businesses, and companies must reinvest to secure future supply. We analyze these reinvestment patterns and their relationship to the commodity cycle, identifying firms positioned to create long-term value rather than chase short-term price moves.
From AI-driven energy infrastructure to de-dollarization trends in gold and the electrification boom in copper, the natural resources space is undergoing profound change. These shifts create opportunities that only active managers can capture, pivoting as fundamentals evolve. Passive strategies simply cannot respond to these dynamics.
Finally, we leverage the global research and risk management capabilities of the DWS platform, combining local insights with global reach to deliver a strategy that is informed, disciplined, and opportunistic.
Also, the Xtrackers team has expertise in managing ETFs as a vehicle to encapsulate investment ideas. The Xtrackers RREEF Global Natural Resources ETF (NRES) is an example where we believe we can offer a differentiated solution to investors.
You can learn more about NRES and opportunities in strategic natural resource investing at Xtrackers.com.
Thank you for your insights, Taylor.
Originally published on ETF Trends
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