A $15 Billion CIO's Warning: Commodities Are Speculative Bets, Not Investments

The recent rollercoaster in precious metals has delivered a stark reminder of the inherent volatility in raw materials markets. After a breathtaking rally, gold and silver prices abruptly reversed course last week, leaving many traders reeling. For Hank Smith, Chief Investment Officer at Haverford Trust, this episode underscores a fundamental truth about the sector: commodities are speculative vehicles, not productive investments.

"The recent price action, especially the momentum-driven surge into 2026, reveals the speculative nature of these markets," Smith told Business Insider. "Investors are chasing price moves, not underlying value." Despite last Friday's 12% drop, gold remains up approximately 70% year-on-year, while silver has gained a staggering 160% over the same period.

Smith, who manages over $15 billion in assets with zero direct exposure to commodities like metals, wheat, or oil, challenges the conventional wisdom of using them as portfolio hedges. While some advisors tout gold as an inflation hedge or a safe haven, Smith is skeptical. "Physical commodities have no earnings, no balance sheet, and pay no dividends," he argues. "Your profit depends entirely on finding someone willing to pay a higher price later. That's the definition of speculation."

Background & Market Shift: The accessibility of commodities has transformed in recent decades. The rise of futures and ETFs like the SPDR Gold Trust (GLD) has democratized exposure, allowing investors to bet on prices without taking physical delivery. Smith notes this has changed the market's composition. "Thirty years ago, most futures buyers had a physical interest—an airline hedging fuel costs, for example. Today, a significant portion of activity is driven by hedge funds and other financial players purely speculating on price direction."

Long-Term Performance Questioned: Smith also dismisses the notion of gold as a reliable store of value over long horizons. "Over a 100-year period, gold's returns have likely trailed those of Treasury bills or even a checking account, especially when compared to the power of reinvested dividends from equities," he stated.

His advice for investors? Focus on assets that generate cash flow. "Capital is better deployed in productive, income-generating assets like dividend-growing stocks. That's investing. Commodities, in contrast, are a bet on price movements—a distinction that becomes painfully clear during periods of extreme volatility like we just witnessed."

Reader Reactions

Michael R., Portfolio Manager, Boston: "Smith makes a valid point about cash flow. In a low-yield world, the siren call of momentum in commodities is strong, but discipline is key. Our core equity holdings have provided steadier, compounding returns."

David Chen, Retail Investor, Austin: "This feels out of touch. When central banks are debasing currencies, gold's 'speculative' nature is exactly the point! It's a bet against monetary policy failure, not a corporate earnings call. Diversification into tangible assets has saved portfolios during crises."

Sarah Wilkinson, Financial Advisor, Chicago: "It's about purpose and proportion. Using a small, tactical allocation to commodities or gold ETFs for diversification is different from going all-in. Smith's warning is crucial for investors who think they're 'investing' when they're actually timing a volatile market."

James K., Former Futures Trader, NYC: "He's absolutely right about the market's structural shift. The sheer volume of pure financial capital now dwarfs commercial hedging activity. This amplifies volatility and disconnects prices from physical supply-demand fundamentals faster than ever. The average ETF buyer has no idea what they're really in for."