Momentum Highlights Changing Strengths Between Energy And Metals

The first week of 2014 has so far seen a reversal of fortune between the best and worst performing sectors of 2013. Precious metals led by platinum and palladium have begun the year strongly after suffering a major setback last year and this has resulted in the return of positive momentum across all four metals in our table with gold turning today. The energy sector meanwhile has seen positive momentum slow in response to the sharp sell-off last week. WTI crude and natural gas turned negative on Friday and, at current levels, Brent crude and gas oil will join them today.

Raised growth expectations and a speculative community running ahead of itself in terms of net-long positioning ensured a strong finish for crude oil in 2013, but since then, the news about increased supply from Libya and a stronger dollar have offset worrying news from Iraq and a North American cold spell raising demand and reducing supply.

The metal sector led by those primarily finding an industrial use, such as copper and platinum, have seen a decent recovery over the last week despite the headwind being created by the stronger dollar. Further upside from here may short term prove difficult to achieve, not least considering doubts about strength of demand from emerging economies at a time of rising supplies. Perhaps with the exception of platinum where some geopolitical concerns related to the world's largest producer South Africa, make production levels difficult to estimate at a time of healthy pickup in demand.

Copper has retraced after once again failing to negotiate resistance in the USD 3.4 per pound area on High Grade and USD 7,500 per tons on LME Copper. The weakness has been driven by a couple of weaker-than-expected economic data points from China over the past week both of which have raised some concerns about economic growth in the world's largest buyer of industrial commodities.