Evaluating Physical Commodities: Gold and Crude Oil

As a portfolio manager at an investment firm, you are evaluating the role of physical commodities in your firm’s alternative investment strategy. Your firm is considering an allocation to gold and crude oil, both of which have distinct characteristics and factors affecting their returns.

Discuss the potential benefits and risks associated with investing in physical commodities, specifically gold and crude oil. Include the impact of supply and demand dynamics, macroeconomic factors, and geopolitical influences in your analysis. Provide a well-reasoned conclusion about their appropriateness for inclusion in a diversified investment portfolio.