Sentiment towards commodities as an asset class has rarely, if ever, been more negative. This is understandable given the persistent weakness of prices and the headwinds on both the demand and supply side. However, we believe that the mood is now excessively bearish. A sustained recovery may have to wait for the markets to adjust to the prospect of higher US interest rates and further dollar strength. Nonetheless, from a contrarian point of view, the current crisis of confidence presents many opportunities. Relative to the consensus, we are particularly positive on the outlook for the prices of (most) industrial and precious metals.
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