JP Morgan is out with its first overweight call on commodities since September 2010 (a call which turned out to be highly prescient) - here are some of the key takeaways from this bold contrarian call:

  • Seasonality is very favorable once again for commodities
  • Risk is now skewed toward demand growth surprise and production disappointments
  • Metals (particularly copper and gold) are now at price levels which spur involuntary production cuts
  • Jewelry buying cohort which went on a buying strike above $1700/oz in gold last fall may set support around $1150/oz
  • Strong Chinese demand for copper at $6500 per metric ton
  • Inventory destocking is over and storage bunkers need to be replenished
  • In crude oil markets spare capacity is tight and non-economic supply risks are rising
  • 'Green' shift in Chinese policy means moving away from coal to oil & gas (not solar & wind)

Additional Coverage - "Ten Reasons to Get Overweight Commodities....Now"