With the US tariff program creating havoc in global financial markets, a number of analysts are tipping a potential global recession.

Major global investment bank and financial services company Goldman Sachs has suggested that hedging on long-gold and short-oil may provide useful protection against that risk.

Still bullish on gold

Daan Struyven, Goldman Sachs’ co-head of global commodities research and head of oil research, says the long-term outlook for gold remains structurally bullish, despite the recent volatility.

“I think this is a very attractive point to enter long gold positions, especially as a hedge both against the general risk of a recession in the US or globally, but also given the particularly important role that gold could play to mitigate the likely drivers of a potential recession,” Mr Struyven said.

He has forecast that gold prices could rise to $6,752 per troy ounce in a recession.

“Gold can help mitigate some of those recession drivers [that] include policy risk from the US, whether it’s on the trade policy side, pressure from the Fed, or other changes in US institutions and governance that may erode the trust of global investors in US assets.”

Potential double whammy

While Goldman Sachs believes oil is facing a potential double whammy of reduced demand and increased supply, the relatively low cost of oil put options presents an attractive opportunity for short positions.

Mr Struyven expects Brent crude oil prices to fall from around $101 per barrel to approximately $92 per barrel by the end of 2025 and to around $87 per barrel by the end of 2026.

He believes there’s a risk oil prices could fall even more than this baseline forecast.

Oil puts are seen as effective insurance policies against lower prices, with a potential rally to around $63 per barrel in a worst-case scenario.

Increased OPEC output

OPEC has elected to increase production with the aim of restoring compliance and slowing US shale growth.

The impact of tariffs on US metals, particularly copper, is also a factor.

Mr Struyven says OPEC’s high spare capacity allows it to stabilise the market and support prices and he has suggested a selective hedging strategy for 2026, with long gold positions and short oil positions.