Barclays Capital favors a “small underweight” positioning among commodities in base metals but a “sizeable overweight” in precious metals. A risk rally across all sectors lifted commodities in the past month, but Barclays doubts the trend will last. “Although growth prospects look a little stronger in the U.S., they are much weaker in Europe and the picture for China is still worrying,” Barclays says. “Moreover, the European debt situation shows no sign of resolution, so we are continuing to favor defensive positioning, reducing weightings in those commodities likely to suffer most from further waves of pessimism. The main change in this month’s sector weightings is a shift to a small underweight in base metals, which were amongst some of the biggest price gainers in recent weeks as short positions predicated on a slowing global economy were closed out.” Barclays says financial-market conditions favor continued outperformance in precious metals. It lists a “small overweight” in energy since low crude inventories and the approach of the Northern Hemisphere winter should limit the oil price downside, as well as an underweight in agriculture, where weather threats appear to be easing and harvest news has been “relatively good,” especially in grains.
Source:Kitco
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