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Gold’s disappointing recent performance has strengthened the case that the metal is not a reliable inflation hedge. Tim Pickering, President and CIO of Auspice Capital Advisors, said investors should instead consider broad commodity exposure as the global economy enters what could become a generational supercycle.

Pickering told Kitco News that he personally likes gold and silver, but persistent inflation and elevated interest rates are creating serious obstacles for both metals. He would not invest in either precious metal under current market conditions.

Gold’s central weakness as an inflation hedge is its sensitivity to interest rates precisely when consumers are confronting higher prices. Pickering noted that gold also struggled between 2020 and 2022, even as U.S. inflation climbed to a four decade high of 9%.

“Gold's not a panacea. It's just a diversifier,” he said. Pickering argued that investors must separate assets that respond to inflation from commodities that directly contribute to rising production and consumer costs.

“Commodities are a source of inflation, not a reaction to it,” he said. Energy, industrial metals and agricultural commodities are direct inputs into the global economy, while gold can benefit from monetary uncertainty and changing investor sentiment.

That distinction has become more consequential with oil trading around $100 a barrel and central banks attempting to contain inflation without harming economic growth. Higher interest rates can reduce demand driven inflation, but they are less effective against rising costs for energy, wages and raw materials.

Pickering expects inflation to remain structurally higher than the unusually low levels recorded during the decade after the 2008 financial crisis. Referring to annual inflation of roughly 3% to 4%, he said, “People need to accept that we're in a world where that type of inflation is normal.”

Auspice remains fundamentally bullish on commodities, including precious metals, but Pickering said actual investment decisions should follow price trends rather than economic forecasts. The firm’s broad commodity strategy tracks 12 markets and currently holds long positions in nine.

Gold, silver and North American natural gas are the three markets without long exposure. The portfolio instead owns positions in petroleum products, copper, corn, soybeans, wheat, cotton and sugar, reflecting stronger price action elsewhere in the commodity complex.

Pickering said the absence of gold and silver does not amount to a fundamental rejection of either metal. “I love the fundamentals of silver,” he said, while indicating greater optimism 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.”

Auspice aggressively reduced its silver exposure near the end of 2025 as the metal’s historic rally pushed volatility sharply higher. By the time silver reached its peak in January, the firm had effectively exited the position.

A return to gold or silver would require sustained positive price momentum. “I'm never going to pick a bottom,” Pickering said. “We look for momentum.”

Auspice generally waits for a trend to develop over several months before establishing a position. It then adjusts exposure according to volatility and the relative risk that a market contributes to the broader portfolio.

Pickering does not believe weakness in gold and silver means the broader commodity bull market is over. “I think we're six years into a 20-plus-year cycle,” he said. “We're in a supercycle, in my opinion.”

He identified three structural forces behind that outlook: expanding consumption among emerging market middle classes, the global energy transition and accelerating demand from artificial intelligence infrastructure and data centers. Those forces are supporting demand for energy, industrial metals and agricultural products while investment in new production has failed to keep pace.

Geopolitical instability and supply chain disruptions are adding pressure to constrained markets. Pickering cited the conflict surrounding the Strait of Hormuz, where higher energy prices could be followed by fertilizer disruptions that eventually affect agricultural production and food prices.

Farmers may have already secured fertilizer for this year’s growing season, but Pickering said higher costs could become a larger concern in 2027. Capital has already rotated from grains into energy and then back toward agricultural commodities as market conditions changed.

Auspice’s systematic process relies on price trends, position sizing based on volatility and the structure of commodity futures curves. Pickering said this rotation shows why investors should maintain diversified commodity exposure rather than attempting to predict the next isolated rally in gold, silver or oil.

Higher interest rates could also reinforce the supercycle by making it harder for mining and energy producers to finance new capacity while competing with technology companies and artificial intelligence developers for capital. “Structurally higher interest rates is not helping this problem,” Pickering said. “It's exacerbating it significantly, in my opinion.”

Pickering also sees new difficulties for the traditional 60/40 portfolio of equities and bonds because persistent inflation can weaken fixed income diversification. The simultaneous decline of stocks and bonds in 2022 demonstrated the potential value of alternatives that behave differently from conventional financial assets.

Direxion’s recently launched U.S. 500 Plus ETF, identified by the symbol SPXP, tracks an index developed by Auspice. It combines S&P 500 exposure with a managed futures strategy spanning commodities, currencies and interest rates.

Pickering does not expect central banks to raise rates aggressively enough to cause a severe recession merely to restore traditional inflation targets. With inflation since the 1970s averaging around 4%, he said, “You're not afraid of normal inflation. You're afraid of stagflation.”

DISCLAIMER: GoldInvestors.news is not a registered investment, legal or tax advisor or broker/dealer. All investment/financial opinions expressed by GoldInvestors.news are from the personal research and experience of the owner of the site and are intended as educational material. Although best efforts are made to ensure that all information is accurate and up to date, occasionally unintended errors and misprints may occur.