Futures & Commodities

Gold isn't the only precious metal in 2014

Sugar and coffee may be out of vogue (very bad for you), gold is too flash (though some of us still like it), and, thanks to the glimmers of a global industrial recovery, we're back to basics when it comes to industrial metals.

Recent data from the U.S. Commodity Futures Trading Commission showed net long commodity positions falling by 11 percent in the week to January 7. But while investors think we'll see softer prices for sugar, coffee, and corn, they have become more bullish on gold, with net long positions in the shiny metal rising 18 percent.

(Read more: The case forditching stocks and buying gold in 2014)

Noah Berger | Bloomberg | Getty Images

While gold prices have risen steadily since December 20 from $1,200 per ounce to a current level of around $1,250, they have nonetheless moved off from a very low base. In 2013, the precious metal's price dropped 28 percent in 2013, bringing a halt to 12 consecutive years of gains.

Gold to struggle longer term

But not everyone is that optimistic. Analysts at Barclays think gold will struggle to maintain even its current gains, and favor selling it into rallies in the coming year.

(Read more: Gold to tank in2014: Goldman Sachs)

Gayle Berry, Head of Base Metals Research from Barclays, thinks there will continue to be strong downside risks to gold given expectations of a stronger dollar once the U.S. Federal Reserve reins in its bond-buying program. In a Barclays research entitled "Buy industrial metals on dips and sell gold rallies in 2014" published January 13, Berry also thinks 2014 will hold more modest global growth.

The note highlights a further structural shift in market dynamics would need to happen for gold to continue higher, like proof of inflation, postponed interest rate hikes, or considerably stronger-than-expected Chinese demand. The analysts anticipate gold prices to average $1,205 an ounce in 2014 compared to their 2013 expectations of $1,410 an ounce.

No Longer Bullish on Base Metals: Pro

More upside for base metals

On the other hand, industrial metals could be another story. Supply growth will start to slow this year while demand is improving. Leading indicators from manufacturers and industrial production figures from around the world have been strengthening, and a steady improvement in global growth is still anticipated.

All this'll mean more demand for base metals as they're used up by stainless steel, the auto industry, electrical components, building and packaging to name a few. Also, investors have become more optimistic on Chinese demand.

In her note Berry says industrial metal prices will strengthen through 2014 helped by an increase in demand and what she forecasts as the end to one of the strongest periods ever for base metals supply growth. In some cases, such as aluminium, this will be due to production cuts (prices are very low, and producers outside China have been making big cuts). In other cases, like Nikkel, the Indonesian iron ore export ban will lead to production cutbacks.

(Watch: What the F-150 saysabout the aluminum industry)

According to Barclays research, both copper and zinc supply growth is due to peak this year and then slow, causing the bank to revise up its 2015 forecasts for both metals. Berry adds that, while we saw selling of base metals on rallies last year, 2014 will see buying on dips.

Berry explains that the metals markets are at an important turning point: moving from rising stocks, strong supply and surpluses, to an environment of inventory draw downs, slowing supply growth, and deficits. Overall, Barclays' message is clear: more upside to come for base metals..

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