Investment Considerations in Physical Commodities

In recent years, the rising volatility in commodity markets has prompted institutional investors to reconsider their allocations to physical commodities, particularly in light of geopolitical events and changing climate patterns affecting supply chains. Consider an institutional investor's decision to increase exposure to physical commodities such as gold, crude oil, and agricultural products.

Discuss the factors that an investor should consider when evaluating the investment potential of physical commodities. In your response, address the unique characteristics of physical commodities including storage, transportation, market dynamics, and the impact of macroeconomic factors. Additionally, analyze the impact of regulatory issues and technological advancements on the investment thesis.

Support your discussion with relevant examples and provide a comprehensive overview of the potential risks and rewards associated with investing in physical commodities.