The second quarter's falloff in commodity prices has led some investors to turn bullish on the asset class, and search for cheap buying opportunities. However, investment bank analysts warned that now is not the time to go bargain-hunting.
Barclays cuts its stance on commodities to "underweight" on Friday, citing threats from monetary policy normalization and rising supply of gold and other metals, while Citi analysts said for most commodities it is still not time for "bottom-fishing."
"As markets begin to focus on the prospect of monetary normalization, demand for precious metals may weaken further," Ana Swirski, a commodities analyst at Barclays, said in a research note. She suggested that weak supply-demand dynamics in major commodity sectors, such as industrial metals, presented downside risks to the overall index.
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"The market retreat in the second quarter was part of a more basic trend as the commodity supercycle wound down, and for most commodities, it's probably still not time for bottom-fishing," said Edward Morse, the head of global commodities research at Citi, in a research note.