Metals are in line for a ‘turnaround year’ in 2014

The head of research and investment strategy at ETF Securities said 2014 will be a “turnaround year” for the asset class, which has underperformed developed market equities for the last three years in a row.

He said: “We think markets are underestimating developed economy central banks’ bias towards supporting growth. Healthy demand growth in the US and China, disappointments to current highly optimistic supply forecasts for a number of key commodities, and continued ample global liquidity should support commodity prices in 2014 in our view.”

Mr Brooks warned that certain factors could undermine this prediction, including growth “disappointments” in the US or China, adverse events in the world economy, or a stronger supply response than currently forecast.

However, he added: “While all of these risks are real and need to be monitored, on our base-case scenario we are bullish broad commodity exposure; copper, lead, platinum and palladium. The combination of economic growth in China, continued developed world economic recovery, and ample global liquidity should support buoyant demand for industrially linked metals.”

Adviser view

Philip Milton, managing director of Devon-based IFA Philip J Milton & Co, has warned clients recently that the price of gold could fall even further, saying that gold mining shares offered a much better alternative to the asset class itself.