Barclays warns over commodity longs

UK’s investment bank, Barclays has issued warning against recent rallies in commodities and investors; interest in commodity products both stocks as well as ETFs.

According to Barclays, recent rise in commodities, including oil, copper, iron ore has not being backed by improvement in fundamentals and the whole pack may face rapid price deterioration as investors could very well rush for exits.

Commodities are best performing asset class so far this year.

Gold even after recent underperformance and sharp drop is still up around 15% YTD. Brent oil is up around 4.5%, while WTI is up 3%. Industrial metal copper is up more than 3% so far this year.

However Barclays warning that since this rally is not supported by change in fundamentals, possibilities are bleak that there could be similar move in the second quarter and without further risks are always higher that there could be rush for position liquidation.

According to the bank, investors are taking up more short term bets, rather than longer term buy and hold positions to diversify portfolios or hedge against inflation.

While, in parts, we at FxWirePro, agrees with Barclays that fundamentals haven’t changed much, however there is however a weaker Dollar theory to consider here and we partially disagree on its views on positions, we feel some longer term investors are also building up their portfolios.