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Positioning for a bumpier ride in early 2013

London, 18 December 2012

Commodities Research Rankings: The recent period of relative calm in commodities markets looks unlikely to persist, in the view of Barclays. As in previous years when commodities have started strongly, investors are underweight and prices have fallen during the final quarter. "However, a likely resolution of US fiscal cliff issues, a recovering Chinese economy and the potential for event risk to materialise, in the form of geopolitics and weather, all suggests a much more positive price environment heading in to 2013," according to Barclay's commodity specialist Kevin Norrish.

"Commodities recently have been moving much less as a monolithic asset class and much more as a collection of rather loosely related markets, where fundamentals often differ widely and we expect this process to gather momentum in 2013.

"The prospects of a return to an environment in which commodities are driven much more by idiosyncratic risk looks greatest in markets like oil and agriculture, where there exists big gaps between potential supply threats early next year (high) and the ability to absorb them without substantial price appreciation (low).

"The main changes to our commodity weightings this month are a significant move up in exposure to crude oil and refined products. In contrast, we have increased our underweight in industrial metals (especially aluminium), where we think the current rally is unsustainable and also in precious metals as we think the slowdown in investor demand will continue into early 2013, following a brief spike higher spurred by September’s announcement of QE3."

Last month, the BCRI matched the performance of the unadjusted index, rising by just 0.8%. In the year-to-date, the research index is beating its benchmark by around 30bp, the DJUBSCI by 130bp and the S&PGSCI by 30bp.


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