Gold has extended gains to climb to its highest level since last October as investor demand for safe havens is on the rise as the price of oil continues its tail-spin.
New data on gold positioning shows investors are increasing their long positions, or bets that the yellow metal will increase in price, with gold net longs at peaks not seen since August last year according to UBS.
At the same time, however, copper has fallen further below $6,000, beyond five-year lows as oil weakness reportedly sparked selling from Chinese hedge funds, with analysts now branding the metal a "favorite short".
Spot gold was up around 0.4 percent at $1,238 while three-month copper fell 2.8 percent to $5,845 per tonne on Tuesday, its lowest level since October 2009. Spot silver also saw strong gains of 3 percent after Brent crude slid 4 percent to a fresh six year low.
"Speculative length is still quite subdued at only 42 percent of the record, which suggests there is ample room to extend positioning further. For a second straight week, gold positioning has gained on a combination of fresh longs and short-covering. That positioning is not increasing too much, too soon potentially adds more stability to the move," said UBS strategist Edel Tully.
"Although gold seems to have met resistance at $1,230 for now, that prices are sitting comfortably above the 100-day moving average at $1,213.27 is encouraging," she added.
Meanwhile, short positions in copper are now at multi-year highs in the face of oil weakness, according to head of commodity research at Deutsche Bank, Michael Lewis.
"Copper remains our favourite short in the (commodity) complex. The fact that both local and central government balance sheets in China are at risk from declining land sales and hence lower revenues will also constrain their ability to boost growth through infrastructure investments," Lewis said.
"In our view, this means markets with a disproportionate exposure to China's property sector, like copper, are vulnerable," Lewis said, adding that along with U.S. natural gas, copper is exhibiting positioning risks.
"In fact net shorts are at multi-year highs in both markets," he said.
Oil prices continued their dramatic slump on Tuesday, as an OPEC Organization of the Petroleum Exporting Countries (OPEC) oil ministers reiterated that the group planned on sticking to its current production strategy.
U.S. crude for February delivery fell below $45 a barrel on Tuesday morning for the first time since April 2009, before recovering some ground. Brent crude futures lost over 4 percent and were trading around $46 a barrel. Both have crash by around 60 percent since mid-June last year.
While gold may have benefited from safe haven flow after oil's price crash and proved resilient against the U.S. dollar, Lewis is not convinced of its price stability long-term.
"The overriding forces driving the market will be the vigor of the US economic recovery and the path of US long-term real yields. Gold is therefore vulnerable in the event positive US growth shocks," he said.