The Commodity Investor

COMMODITIES RESEARCH 29 February 2012
THE COMMODITY INVESTOR

Testing the ground
Sentiment has improved in commodity markets in the past month, as a string of Suki Cooper
better-than-expected data has confirmed that the global economy is in a recovery +1 212 526 7896
phase. Activity and employment data in the US point towards a solid recovery, suki.cooper@barcap.com
China is on a soft landing and even in Europe business confidence has improved.
Investors are again seeking exposure to commodities with a strong fundamental Roxana Mohammadian Molina
case, but are testing the ground to see whether the recovery is sustainable. +44 (0)20 7773 2117
roxana.mohammadian-molina@barcap.com
As a result of this relatively more bullish outlook, investors have returned to
commodity investments. Following the second-largest monthly outflow ever Kevin Norrish
from commodities, in December (-$7.7bn), investments rebounded in January +44 (0)20 7773 0369
with an inflow of $3.7bn. It was the first time since July 2011 that all investment kevin.norrish@barcap.com
categories and commodity sectors had inflows, with precious metals ETPs
receiving the largest share of investment at $1.1bn. Amrita Sen
+44 (0)20 3134 2266
We expect commodity investment flows to continue to rebound in 2012 after last amrita.sen@barcap.com
year proved the weakest for inflows into the sector since 2002. Our latest survey
of commodity investor sentiment (reproduced in our focus section this month) www.barcap.com
shows that 56% of respondents expect to initiate or increase their commodity
exposure over the next three years.
So far this year, value strategies have outperformed other sources of excess
return for commodities. Our view of 2012 as a "beta year" for commodities
suggests value will continue to outperform. This is consistent with our
expectation of significant upside potential across a number of commodities
markets (particularly base and precious metals).
This month, we are opening three new trades: a long in palladium, a short in
coffee and a relative value trade going long European fuel oil and short gasoil.
Figure 1: January saw a $3.7bn inflow into commodities
15 Monthly inflows into commodities

(Indices, ETP, MTNs, $bn)
10
-5
-10
May-09 Jan-10 Sep-10 May-11 Jan-12
Source: Bloomberg, MTN-i, ETP issuer data, Barclays Capital
PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES STARTING AFTER PAGE 34
Barclays Capital | The Commodity Investor
FOCUS
Commodity investing to rebound in 2012

After cutting their exposure to commodities in 2011 as part of a general desire to reduce
risk, investors plan to significantly increase their commodity investments in 2012.
That is the key message to emerge from the latest Barclays Capital commodity investing
survey, held annually since 2005 and sampling the views of over 100 institutional
investors in Europe and the US.
The survey shows that despite the turmoil of recent years, investors still value
commodity assets for the reasons they always have done: as a portfolio diversifier and
generator of competitive returns over the long term.
For more than 70% of the survey the appropriate long-term average weighting for
commodities in a portfolio is over 6%, a long way above current norms For more than
70% of the survey the appropriate long-term average weighting for commodities in a
portfolio is over 6%, a long way above current norms.
The demand to increase direct commodity exposure over the next three years is
high and after a soft 2011, investment inflows to commodities are expected to
rebound in 2012.
Last year’s negative price trends are not expected to persist and crude oil, copper and
gold are expected to be the best performers in 2012. US natural gas is forecast to be
the worst.
Figure 2: After last year’s slowdown, commodity investors expect inflows to the sector
to rebound in 2012
100 Barclays Capital estimates of Inflows into commodities ($bn)
80 Commodity medium term notes issuance

Exchange traded commodity products
60
Commodity index swaps
40
20
-20
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Source: Barclays Capital
29 February 2012 2
Investor appetite for commodities is expected to rebound in 2012

The Barclays Capital Survey of investor attitudes to commodities has been carried out bi-
annually at our US and European Commodity Investor Conferences since 2005 and during
this time has proved a useful guide to investor attitudes and expectations towards
commodities as an asset class. This year both conferences will be held in the same week
and we have combined the survey responses from both European and US attendees.
Our latest survey carried out prior to the 8th Annual European and 7th New York Commodity
Investor Conferences in the week of 27 February, has been undertaken at a time when fear
of European sovereign debt contagion has been easing, business confidence has been
improving, the economic outlook, especially for large commodity consumers such as the US
and China, has been getting better and commodity assets have been performing well.
Although risks still linger, this is quite different to last year when the market environment
was one of almost unprecedented geopolitical turmoil in the MENA region, high levels of
macro-economic uncertainty and extremely volatile energy markets as a result of the
Japanese earthquake.
The key message from this year’s survey is that despite the turmoil of recent years, investors
still value commodity assets for the reasons they always have done: as a portfolio diversifier
and an historical generator of competitive returns over the long term. The demand to
increase direct commodity exposure over the next three years is high and after a soft 2011,
investment inflows to commodities are expected to rebound in 2012. Last year’s negative
price trends are not expected to persist and crude oil, copper and gold are likely to be the
best performers in 2012.
Commodity investors are entering 2012 under-exposed to the asset class, with less than
one-quarter close to their desired allocation levels.
In 2011 Investors cut commodity exposure mainly as part of a general desire to reduce
their risky assets rather than because of specific commodity-related concerns, with 45%
citing this as the main reason for reducing commodity exposure last year.
For more than 70% of the survey the appropriate long-term average weighting for
commodities in a portfolio is over 6%, a long way above current norms.
A combined 77% cite portfolio diversification or absolute returns as the main

reason for investing in commodities, a proportion that has remained remarkably
consistent over time.
56% of the survey respondents expect to initiate or increase their commodity exposure
over the next three years.
48% expect commodity price trends to be positive this year, while only 8% expect price
trends to be negative.
Crude oil (22%), gold (16%) and copper (13%) got the most votes for best performer in
2012. US natural gas (31%) gained the most votes for worst performer.
After cutting commodity exposure in 2011, investors are still light

After the events of the past 12 months, it is not surprising that investors have begun 2012
with their commodity exposure at low levels. In response to the question “How have you
altered your commodity exposure in the past 12 months?” our survey shows that almost
half of the respondents either scaled back or cut their commodity exposure compared with
29 February 2012 3
just 13% that had taken similar action in our survey of a year ago. Consistent with this more
cautious approach less than 18% have increased their exposure compared with almost half
who did so in last year’s survey.
As a result most investors are currently a long way below their target allocations. This time
last year over one-third of the investors we surveyed were at 75% or above of their target
allocation to commodities. In our latest survey that figure has fallen to less than a quarter,
while the proportion of investors that have current allocations at less than 25% of their
target has risen from around a fifth to almost one third.
Figure 3: Investors cut their commodities exposure in the Figure 4: … and are now less exposed compared with last
past 12 months… year
60% How have you altered your commodity exposure in the 40% What is your current position in commods as a
past 12 months? porportion of your target allocation?
35%
50%
30% 2012 2011
40% 2012 2011
25%
30% 20%
15%
20%
10%
10%
5%
0% 0%
Cut Scaled Held Increased Not yet 75% or above 50 - 74% 25 - 49% Less than
completely back constant invested 25%
Source: Barclays Capital Source: Barclays Capital
The survey replies suggest that the main reasons commodity exposure has been reduced
are not directly related to commodities. A combination of general risk aversion plus other
non-commodity-related factors, such as a need to adjust currency weightings within
portfolios, were chosen by 61% of the respondents as the main reason. In contrast just 25%
cited the high level of correlations with other asset classes and only 14% the problem of low
returns as their main reasons.
Figure 5: General risk aversion, the main reason for cutting positions in commodities
50% What is the main reason you have cut your commodity exposure in past 12 months?
40%
30%
20%
10%
0%
High correlations Poor commodity General risk aversion Non-commodity
with other assets returns to all growth related factors (e.g.
sensitive assets need to reduce dollar
exposures)
29 February 2012 4
2012 looks like being a stronger year for investment flows

Investment flows into commodities fell sharply in 2011. We estimate that a net $15bn was
invested last year compared with an average of $50-60bn over the previous three years.
However, a rebound in flows looks likely in 2012, according to our survey.
In response to the question “how do you expect to change your commodities exposure over
the next three years?” 56% chose the option to initiate or increase commodity exposure
compared with 45% last year. Only 7% plan to scale back their commodity positions
compared with 14% last year.
Consistent with this, a rebound in investment flows is expected in 2012 with almost 70%
expecting net new investments in 2012 to beat last year’s $15bn total.
Figure 6: Appetite for new commodities investments has grown Figure 7: A rebound in investment flows is expected in 2012
60% How do you expect to change your commodities 70% How much do you think will be invested directly in
exposure over the next three years? commodities in 2012?
50% 60%
40% 2012 2011 50%
30% 40%
30%
20%
20%
10%
10%
0%
Remain Cut to zero Scale back Maintain Initiate or 0%
uninvested at current increase Less than $15-30bn $30-50bn More than
level $15bn $50bn
Investors still value commodities for diversification and returns

Despite volatile commodities markets and returns, plus several recent periods where
correlations with other asset classes have been unusually high, our survey suggests that
the long-term rationale for investing in the asset class has remained remarkably
consistent over time.
Almost half of the respondents chose portfolio diversification as their main reason for
investing in commodities, a third chose absolute returns, and one-tenth inflation protection.
These percentages are very similar to those of last year and indeed have changed little over
the lifetime of our survey, as is clear from the very similar responses to our 2006 survey
shown in Figure 7.
The fact that the reasons for investing in commodities have remained so consistent over
time, despite the unprecedented events of the past four years, would appear to be a strong
vote of confidence in commodity assets as a portfolio diversifier and an historical generator
of competitive returns over the long term.
29 February 2012 5
Figure 8: Diversification still the biggest attraction… Figure 9: … with most investors wanting 6% or more of their
portfolios in commodities
60% What is the main reason you invest in commodities? What is the most appropriate long-term weighting of
60% commodities in a portfolio?
50%
2012 2011 2006
50%
40%
2012 2011 2006 40%
30%
30%
20%
20%
10%
10%
0%
Portfolio Absolute Inflation E. market Currency Other 0%
d'fication return hedge growth dbs'ment 0% 1-5% 6-10% >10%
Direct exposure to commodities is what investors want

Investors favour direct exposure to commodities as the best way to access commodity
market trends in 2012. Around two-thirds chose this option compared with just over a
quarter who chose the next most favoured option, commodity equities. We believe that this
reflects a preference for the kind of risk profile provided by direct commodity returns, which
is very different to that of commodity equities (these have historically had a strong
correlation with overall equity market trends).
The favoured methods for gaining that exposure reflect the growing range of choices
available to investors. The main option for getting commodity exposure in our early surveys
was via simple exposure to a static, broad-based index. That is now the least favoured
option (at just 6%), with much greater interest in more sophisticated dynamic index
approaches (21%). Overall the main ways to access direct commodity exposure are fairly
equally split between indices (static and dynamic), external asset managers and exchange
traded products. Interestingly, those opting for owning physical commodity assets
(farmland, commodity infrastructure, mines or refineries) remain in the minority at just 9%.
Figure 10: Investors favour direct leverage to commodities… Figure 11: … and plan to achieve this in a variety of ways
80% Which asset class will be the best way of accessing 40% What is the main way you will be investing in
commodity trends? commodities in 2012?
70%
60% 2012 30%
50% 2011
20%
40%
30%
10%
20%
10% 0%
0% Static Dynamic External Exchange Physical
Direct Commodity- Commodity Commodity broad- index asset traded commodity
commodity linked debt equities currencies based strategies manager products assets
exposure indices
29 February 2012 6
Risks: A China hard landing and geopolitics are the main concerns
The key concerns for commodity investors are geopolitics, excessive global liquidity and the
possibility of a hard landing in China.
Given recent events in Iran and Nigeria, and the potential impact on oil supply and prices at
a time when shock absorbing capacity in the form of commercial oil inventories and spare
production capacity is very thin, the pre-occupation with geopolitics (voted for by 42% as
the main upside price risk) comes as no surprise. What is perhaps more interesting is the
concern over upside risks to commodities prices arising from excessive global liquidity
(31%). This suggests that measures such as an extension of the ECB’s long-term
refinancing operations, or further quantitative easing measures, are likely to be viewed as
very positive for the performance of commodity assets.
Figure 12: Geopolitics & too much liquidity main upside risks Figure 13: China hard landing the main downside risk
50% What are the main upside price risks to commodities? 60% What are the main downside risks to commodities?
40% 50%
40%
30%
30%
20%
20%
10%
10%
0%
0%
Excessive
EM demand
disruptions
Geopolitics
Strikes/labour
liquidity
contagion
appreciation
inertia ahead
hard landing
Weather
transactions
global
European
sovereign
China has a
disruption
of elections
credit for
US policy
Lack of
debt
Dollar
To the downside, neither is it surprising given China’s dominant position as the world’s
fastest growing consumer of most commodities that the main risk here is a hard landing.
The 57% that chose this option dwarfed the 26% that opted for European sovereign debt
contagion. Interestingly, problems with commodity trade finance, a lack of which
exacerbated the commodity price decline in 2008/09 and about which much has been
written and commented on in the past six months, was chosen as a major threat by just 4%.
Crude oil, gold and copper are the most favoured commodities
Crude oil, gold and copper are the top picks to perform best in 2012, while US natural gas,
grains and gold received the most votes for worst performer. Crude oil and gold were the
strongest performers among the group of commodities selected for this survey in 2011 so
this vote suggests that investors expect those trends to continue. US natural gas was one of
the worst performers last year and the survey results suggest that is expected to remain the
case in 2012.
Other interesting features of this part of the survey are outlined below.
Gold clearly divides investors. Almost as many investors (11%) voted for gold to be the
worst performer as voted for it to be the best (16%) this year.
29 February 2012 7
Copper, after a disappointing performance in 2011, when prices and returns fell sharply
after peaking in Q1, was chosen as best performer by 13%, but as the worst by 11%, so
views on copper appear to be even more divided than on gold.
Agricultural commodities are not generally expected to make big gains. Although 10%
chose grains as potentially the strongest performer, more (14%) expect it to be the worst.
Meanwhile, the other agricultural commodities, soybeans, sugar and cotton, were chosen
by very few as likely to be the best performer.
Figure 14: Crude oil is the top pick for 2012 Figure 15: US nat gas expected to be the worst performer
Which commodity will perform best in 2012? Which commodity will peform worst in 2012?
Crude oil US Nat. gas
Gold Grains
Copper Gold
Silver Copper
Grains Carbon
PGMs Iron ore
Iron ore Aluminium
Aluminium Steam coal
US Nat. gas Crude oil
Soybeans Sugar
US gasoline Silver
Sugar Cotton
Cotton US gasoline
Carbon Soybeans
Steam coal PGMs
0% 5% 10% 15% 20% 25% 0% 10% 20% 30%
And how did they do last year?

Given the uncertain markets and volatile price movements of the past 12 months, choosing
the best and worst performers this time a year ago was always going to be a difficult task,
so the fact that the number one pick, crude oil, did turn out to be the best commodity
performer in 2011 is impressive. Slightly less impressive is that gold was voted likely worst
performer and turned out to be the second best!
Overall the predictive track record of our survey of commodity performance for 2011 turned
out to be a mixed one.
Energy rankings based on the survey turned out to be fairly accurate. Survey respondents
expected crude oil to outperform and carbon and natural gas to underperform, which is
broadly what happened.
On the other hand, their precious metals rankings were rather wide of the mark with what
turned out to be an unjustified level of pessimism on gold and over-optimism on the PGMs.
The performance in predicting agriculture was mixed; grains, soybeans and cotton rankings
in the survey correlated quite well with relative price performance, but not for cocoa where
relative price performance was much worse than expected.
In base metals, survey respondents were over-optimistic on copper, ranking it above aluminium,
when in fact copper ended the year with a significant underperformance relative to aluminium.
29 February 2012 8
Figure 16: Oil, grains and PGMs were top picks for last year Figure 17: Oil, gold and freight were the top performers
Which commodity will perform best in 2011? Commodity performance in 2011

Crude oil Crude oil
Grains Gold
PGMs Freight
Cocoa Grains
Copper Soybeans
Steam coal Steam coal
Soybeans Aluminium
Iron ore PGMs
Aluminium Iron ore
Cotton Copper
N. gas Cocoa
Carbon N. gas
Freight Cotton
Gold Carbon
-30 -20 -10 0 10 20 30 -80% -60% -40% -20% 0% 20%
Note: Chart shows percentage of respondents choosing each commodity as best Note: Commodity performance is based on price change on final business day of
performer minus percentage choosing it as worst. Source: Barclays Capital 2011 versus price a year ago. Source: Barclays Capital
29 February 2012 9
Commodity survey results

Question Response %
1. What is the main reason you invest in commodities? Portfolio diversification 46.7
Absolute return 30.3
Inflation hedge 10.7
Emerging market growth 8.2
Currency debasement 4.1
Other 0.0
2. How have you altered your commodity exposure in the past 12 months? Cut completely 4.9
Scaled back 42.6
Held constant 30.3
Increased 18.0
Not yet invested 4.1
3. What is the main reason you have altered your commodity exposure in the High correlations with other assets 24.5
past 12 months? Poor commodity returns 14.2
General risk aversion to all growth sensitive assets 45.3
Non-commodity related factors (eg, need to
reduce dollar exposures) 16.0
4. How would you characterise the size of your commodity positions currently 75% or above 24.6
relative to your target exposure level? 50-74% 25.4
25-49% 18.0
Less than 25% 29.5
5. How do you expect to change your commodity exposure over the next three years? Remain uninvested 0.8
Cut to zero 0.8
Scale back 7.4
Maintain at current level 33.6
Initiate or increase 55.7
6. How much new money do you think will be invested directly in commodities in Less than $15bn 30.5
2012 (Barclays Capital estimates $15bn was invested in 2011)? $15-30bn 61.0
$30-50bn 7.6
More than $50bn 0.8
7. Which asset class do you expect to provide the best way of accessing commodities Direct commodity exposure 68.6
in 2012? Commodity-linked debt 3.4
Commodity equities 27.1
Commodity currencies 2.5
8. What is the main way you expect to be investing in commodities in 2012? Static broad-based indices 6.0
Dynamic index strategies 20.5
External asset manager 34.2
Exchange traded products 29.9
Physical commodity assets 9.4
9. How do you view commodity price prospects in 2012? Negative 8.2
Positive 48.4
Neutral 42.6
10. What is the greatest upside risk to commodities in 2012? Weather disruptions 5.7
Geopolitics 41.8
EM demand 18.9
Strikes/labour disruption 0.8
Excessive global liquidity 31.1
11. What is the greatest downside risk to commodity markets in 2012? European sovereign debt contagion 26.2
China has a hard landing 56.6
US policy inertia ahead of elections 3.3
Dollar appreciation 9.0
Lack of credit for commodity transactions 4.1
29 February 2012 10
Question Response %
12. What do you consider to be the most appropriate long-term weighting for 0% 3.3
commodities in a portfolio? 1-5% 23.8
6-10% 51.6
>10% 19.7
13. Which commodity will perform best in 2012? Steam coal 0.0
Carbon 0.9
Cotton 0.9
Sugar 0.9
US gasoline 0.9
Soybeans 1.7
US Nat. gas 4.3
Aluminium 5.2
Iron ore 5.2
PGMs 8.7
Grains 9.6
Silver 11.3
Copper 13.0
Gold 15.7
Crude oil 21.7
14. Which commodity will perform worst in 2012? PGMs 0.9
Soybeans 0.9
US gasoline 1.8
Cotton 2.7
Silver 2.7
Sugar 2.7
Crude oil 3.5
Steam coal 3.5
Aluminium 4.4
Iron ore 5.3
Carbon 6.2
Copper 10.6
Gold 10.6
Grains 14.2
US Nat. gas 31.0
29 February 2012 11
INVESTOR ACTIVITY
Monthly trends in commodity investment flows

$3.7bn invested in January Following a year that saw some of the largest ever monthly outflows from commodities,
2012 started on a firmer note for commodities investment flows. January had $3.7bn total
inflows into commodities, a similar level to that of January 2011 and far greater than the
$7.6bn outflow in December. In sharp contrast to H2 11, this was the first time since July
2011 with positive flows into all product categories and commodity sectors (Figure 19).
AUM bounced back to $419bn This took total commodity AUM to $419bn, up $19bn from the low reached in December
2011 (Figure 18). The AUM increase owes mainly to some hefty price appreciation in
January, particularly within the precious and base metals sector. The S&PGSCI precious
metals index was up 12% in January, its strongest performance since November 2009.
Given that the largest share of total commodity AUM is actually under precious metal
physically-backed ETPs, the price rally across the sector was the main driver of the AUM
increase. Base metals also rallied early this year, following a string of better-than-expected
data around the world. Furthermore, some base metals had become largely undervalued in
late 2011 as a result of the macro headwinds, and these were the markets to benefit most
from the recent improvement in macro sentiment. As a result, the S&PGSCI base metals
index was up 10.1% in January, its largest gain since December 2010.
All product categories and Commodity-linked ETPs had the largest share of inflows and received $1.8bn, following a
sectors saw fresh inflows similar sized outflow in December. Inflows into commodity index swaps bounced back
sharply and came in at $1.5bn, following two consecutive months of outflows. Commodity
medium-term notes had $0.4bn of fresh issuance – a decline with respect to the past few
months but still a healthy amount. Within ETPs, precious metal ETPs saw the lion’s share of
inflows and received $1.1bn.
Investors still testing the grounds Given the sheer number of macro headwinds affecting markets in H2 11, the recent
improvement in business sentiment and the consecutive rally in commodities prices in
January took many investors by surprise. Many felt they had missed the rally, and others
doubted whether the rally would be sustained and decided to act with caution until further
signs of stabilisation emerged. The $3.7bn invested into commodities in January reflects the
Figure 18: Total commodity AUM bounced back in January Figure 19: All product categories received inflows
500 Institutional and retail commodity AUM ($bn) 15 Monthly inflows into commodities ($bn)
450
Medium term notes 10
400 Exchange traded products
350 Commodity index swaps
5
300
250 0
200
-5
150
100 Medium term notes
-10 Exchange traded products
50 Commodity index swaps
0 -15 Total
Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12
Source: Bloomberg, MTN-I, ETP issuer data, Barclays Capital Source: Bloomberg, MTN-I, ETP issuer data, Barclays Capital
29 February 2012 12
conservative attitude of investors who at this stage of the cycle are still testing the grounds
before deciding to reallocate to the asset class. We believe that the improving business
sentiment around the world will support flows into commodities in the months ahead,
particularly into the sectors most closely linked to economic growth.
Index swaps to pick up this year If the macro environment continues to improve as we expect, we believe commodity index
swaps will likely benefit particularly strongly as institutional investors who cut their
exposure last year return to the commodities space. Indeed, this is also what emerges from
the responses at our last commodity investor survey (see focus section): less than a quarter
of this year’s survey respondents are at 75% or above their target allocation to
commodities, and 56% expect to initiate or increase their commodity exposure over the
next three years.
Flows by sector
Precious metals and energy had In contrast to H2 11, when the focus of the market was on a repeat of the 2008 financial
the largest share of flows meltdown, signs of stabilisation emerged in early 2012. Activity and employment data in the
US pointed towards a solid economic recovery, improved business confidence in the euro
area suggest that the recession is likely to be mild, and Q4 GDP in China surprised to the
upside. As a result, growth-sensitive commodity sectors and those sectors that fell most as
a result of the macro headwinds in 2011 witnessed a sharp rally. Nonetheless, precious
metals and energy received three-quarters of total flows (Figure 21). Given energy’s relative
large share in index swaps, energy-linked indices received $0.7bn.
Precious metals received $1.4bn Precious metals received $1.4bn, almost 40% of total flows in January. Most of these flows
came in through ETPs ($1.1bn).
Energy received $1.4bn Energy also received $1.4bn, the largest inflow since March 2011. Within the energy sector,
geopolitical tensions related (but not solely confined) to Iran have ratcheted up. While we
have been listening to Iranian situation as a source of upside risk for a decade, there are
some new factors at play now that make for a far more potentially dangerous outcome, as
the current drift of policy on both sides creates the risk of a significant escalation. Prices,
however, have not rallied so far as much as in the base and precious metals sectors, and
investors have seen current prices as an opportunity to gain from further potential upside.
Figure 20: All products had fresh inflows in January Figure 21: … and all sectors had inflows
16 Inflows into commodity by product ($bn) 16 Monthly inflows into commodity by sector ($bn)
12 12
8 8
4 4
0 0
-4 -4
-8 -8
ETP Indices MTN Precious Energy Base Ags
-12 -12
Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12
Source: Bloomberg, MTN-I, ETP issuer data, Barclays Capital Source: Bloomberg, MTN-i, ETP issuer data, Barclays Capital
29 February 2012 13
Base metals received $0.4bn Base metals, the strongest commodity sector in January after precious metals, only received
$0.4bn, a relatively small inflow compared with other sectors but still a strong number
compared with the past few months. Indeed, January flows were the strongest since the
$0.7bn received in July 2011. Given the improving macro sentiment, we believe that inflows
into base metals will strengthen as the year progresses.
Agriculture received $0.7bn, the first monthly inflow since August 2011.
Index swaps
$1.5bn invested in January We estimate commodity index investments bounced back in January, posting the second-
largest-ever monthly outflow in December, with inflows totalling $1.5bn (Figure 22).
Commodity index AUM increased by $4.5bn m/m to $141bn, owing mainly to price
increases. This marks the first m/m increase in index AUM since October 2011.
Cautious start to the year… Following last year’s headwinds and volatility, index investors have started the year on a
cautious note, and the sharp rally in January took many by surprise. However, if the economic
and business confidence picture continues to improve as we expect over the next few months,
we believe that investment flows will pick up. So far this year, investors have been testing the
grounds and making sure that the recent improvement in economic data is sustained.
The bounce-back in sentiment was also reflected in a positive allocation from US

commodity index-linked mutual funds. Inflows into these totalled $0.4bn, a small but steady
allocation (Figure 23). Overall, following a volatile H2 11 in which institutional investors and
hedge funds cut their bullish views on commodity prices amid contraction fears, it appears
as though these market participants are using price dips as strategic entry points given the
still highly supportive fundamental backdrop in a number of commodities markets. This was
also the case last year, when each easing of macro and debt issues led to a bounce in flows.
The brighter mood among investors is also reflected in the recent CFTC managed money
data (Figures 42-44). Net futures positions as percent of open interest bottomed in late
December; since then, net length has been on the rise as investors have been adding to their
long positions and cutting their short positions. Current net position as a percentage of
open interest is at its highest level since September 2011. For instance, in Brent, net length
has doubled since early January, as investors start to price in a brighter macro outlook and
geopolitical risks escalated.
Figure 22: Estimated total inflows to commodity indices Figure 23: Inflows to major US commodity index-linked
mutual funds, derived from reported data
10 Monthly inflows into commodity index swaps ($bn) 4 Derived real inflows into selected US commodity
8 3 index linked mutual funds ($bn)
6 2
4 1
2 0
0 -1
-2 -2
-4 -3
-6 -4
-8 -5
-10 -6
May-09 Jan-10 Sep-10 May-11 Jan-12 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12
Source: Bloomberg, Barclays Capital Source: Bloomberg, Barclays Capital
29 February 2012 14
Exchange-traded products
$1.8bn invested in January Commodity exchange-traded products started the year on a strong note with $1.8bn
inflows in January (Figure 24). What is more interesting is that this was the first time since
March 2011 that all ETP categories received positive flows, suggesting retail investors have
become more confident in the strength of the recovery that is currently underway.
However, the headline number masks a strong bias towards precious metal ETPs, which at
$1.1bn received the largest share of total ETP flows. Another interesting trend was that
agriculture ETPs had their largest inflow since March 2011 ($0.1bn), although on a much
smaller scale to the $1.6bn received then.
First time since March 2011 with Let us start with the tale of retail investors’ regained confidence in the economic recover.
inflows to all ETP categories Following a H2 11 that had some of the largest-ever monthly outflows from ETPs, January
had a $1.1bn inflow into precious metal ETPs, $0.5bn inflow into energy ETPs and $0.1bn
inflow into base metal and agriculture ETPs. Given the usually jittery nature of ETP flows,
this is a strong signal as to the improving macro sentiment among retail investors. That
said, it is important to put the recent strength of ETP flows into the context of a flows over
the past few years. Compared with inflows in 2009, 2010 and H1 11, January inflows are
weak. However, this is also a reflection of the incipient recovery following a period of
extreme volatility. If, as we expect, the macro outlook continues to improve, we would
expect further strength of flows into ETPs in the months ahead.
Flows into the physically-backed ETPs kicked off the year with strength, with solid inflows
across all four precious metals. AUM across the products has now exceeded $150bn,
boosted by fresh inflows and price appreciation across the complex, but AUM is still shy of
the peak hit last year. Gold was the largest beneficiary of interest with inflows of just over
$1bn, a reversal from the net redemptions of $1.6bn in December and a much stronger
start to the year compared with 2011 when net outflows suffered their weakest month of
$2.9bn. Investment demand in gold has turned positive following a quite uncertain
December in which concerns were skewed towards the end of the gold rally. In December,
physical demand had become less responsive to price dips and investment demand turned
negative despite the vast array of macro uncertainties. Prices bore the brunt of profit-taking
and the need for liquidity amid dollar strength and strong technical resistance. As these
weights lifted in January, investment demand has been able to overlay the return of physical
demand to drive prices higher in light of the Fed pushing out its guidance for a hike in rates
to at least 2014, while the European sovereign debt issues continuing to promote fears
Figure 24: AUM and flows into commodity-linked ETPs Figure 25: Flows into commodity-linked ETPs by sector
12 Commodity ETPs: monthly inflows and AUM ($bn) 250 10 Monthly inflows into commodity ETPs by sector ($bn)
10 8
8 200
6
6
150 4
4
2
2
100
0
0
-2 -2
50
-4 Monthly Flows (LHS) -4 Agriculture Energy
Base metals Precious metals
-6 AUM (RHS) 0 -6 Total
Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12
Source: Bloomberg, ETP issuer data, Barclays Capital Source: Bloomberg, ETP issuer data, Barclays Capital
29 February 2012 15
about currency debasement and longer-term inflation. Indeed, gold ETP holdings have risen
to record highs in tonnage terms in February. Silver drew in net inflows of $31mn but was a
much stronger $367mn including closed-end funds; AUM was boosted to $15.6bn
following silver’s impressive rally in prices, yet interest is still significantly short of its peak. In
PGMs, while in dollar terms, flows into platinum were double those of palladium at $72mn,
January was a notable month for palladium, marking its first monthly inflow since July, and
indeed the strongest month since April. Disinvestment in palladium had capped price
momentum in 2011, but with flows turning positive so far this year, a significant weight has
been lifted and also supported prices.
Base metal physically-backed ETPs ended January with just $28mn AUM, down from $36mn
in January 2011. Copper holds the largest share of total AUM ($17mn), with aluminium
($4.3mn), tin ($4mn), nickel ($1.6mn), lead ($0.6mn) and zinc ($0.4mn) representing smaller
shares. Copper and aluminium were the only two metals with increased quantities of metal
held under LME warrants. Copper initially fell from 1,947 tonnes in December to 1,898 tonnes
in January, but later recovered to 1,972 tonnes and currently stands at 3,164 tonnes.
Aluminium increased by almost 500 tonnes to 1,980 tonnes. These are still very small
compared with total LME inventories (less than 1% for all metals except for tin, in which metal
held under LME warrants represents almost 2% of total LME inventories).
Medium-term notes
The issuance of fresh commodity notes came in relative weak in January. At $0.4bn, it was
the weakest issuance since September 2011 and one of the weakest over the past two
years. However, given the delayed nature of reporting in this category, we would expect the
issuance number to be revised higher. January’s issuance took the cumulative issuance of
MTNs since 2003 to $76bn.
Within the product category, notes linked to broad-based long-only indices received the
largest share ($0.14bn), while notes linked to precious metals received $0.12bn. The
issuance of notes linked to energy more than doubled to $0.1bn, while notes linked to
baskets of commodities declined sharply m/m to a mere $34mn.
Last year, the issuance of commodity-linked MTNs held up well despite all the macro
headwinds. In fact, 2011 was the first time since 2007 when MTNs received the largest
share of all inflows into commodities.
Figure 26: Commodity medium-term notes issuance Figure 27: Commodity MTN issuance by sector
2.0 Commodity medium-term note monthly issuance: 1.8 Commodity MTN issuance ($bn, notional value)
1.8 notional value ($bn)
1.6 Index Basket Base
1.6
1.4 Energy Precious Agriculture
1.4
1.2
1.2
1.0
1.0
0.8
0.8
0.6 0.6
0.4 0.4
0.2 0.2
0.0 0.0
Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12
Source: MTN-I, Barclays Capital Source: MTN-I, Barclays Capital
29 February 2012 16
TOTAL COMMODITY ASSETS UNDER MANAGEMENT
Figure 28: Total commodity AUM

(US $bn) Jan-12 Dec-11 Q4 11 Q3 11 Q2 11 2011 2010 2009 2008 2007
AUM Monthly data Quarterly data Annual data
Total Commodity AUM 419 399 399 402 415 399 380 270 160 196
of which
Precious Metals 193 180 180 184 167 180 154 92 51 42
Base Metals 17.7 17.1 17.1 17.3 19.7 17.1 17.8 13.9 5.6 8.5
Agriculture 90 86 86 90 98 86 94 65 44 60
Energy 118 116 116 111 130 116 115 99 59 85
Figure 29: Estimate of index AUM

(US $bn) Jan-12 Dec-11 Q4 11 Q3 11 Q2 11 2011 2010 2009 2008 2007
Barcap estimates of indices 141 137 137 134 157 137 155 111 65 125
of which
Precious Metals 19 20 20 20 20 20 18 10 7 10
Base Metals 8.0 7.7 7.7 7.7 9.1 7.7 9.8 7.7 2.4 5.6
Agriculture 50 47 47 50 56 47 60 37 25 45
Energy 64 62 62 57 72 62 67 56 31 65
Source: Bloomberg, Barclays Capital
Figure 30: Exchange-traded products (ETP) AUM

(US $bn) Jan-12 Dec-11 Q4 11 Q3 11 Q2 11 2011 2010 2009 2008 2007
Barcap estimates of ETPs 202 187 187 195 186 187 160 104 48 37
of which
Broad-based Indices 31 30 30 32 36 30 20 13 4.0 6.1
Precious Metals 160 147 147 151 134 147 124 73 37 26
Base Metals 1.3 1.2 1.2 1.3 1.8 1.2 1.6 1.3 0.1 0.1
Agriculture 4.2 4.1 4.1 5.2 6.1 4.1 5.2 4.3 1.8 2.0
Energy 5.7 5.7 5.7 6.3 8.2 5.7 9.0 12 4.7 1.9
Source: Bloomberg, ETP issuer data, Barclays Capital
Figure 31: Medium-term notes (MTN) AUM

(US $bn) Jan-12 Dec-11 Q4 11 Q3 11 Q2 11 2011 2010 2009 2008 2007
Cummulative Issuance Monthly data Quarterly data Annual data
Barcap estimates of MTNs 75.8 75.3 75.3 73.2 71.4 75.3 65.4 55.3 46.8 33.8
Note: Breakdown not available across MTN AUM.
Source: MTN-i, Barclays Capital
29 February 2012 17
TOTAL COMMODITY INVESTMENT FLOWS
Figure 32: Total commodity flows

(US $bn) Jan-12 Dec-11 Q4 11 Q3 11 Q2 11 2011 2010 2009 2008 2007
Flows Monthly data Quarterly data Annual data
Total Flows 3.7 -7.6 -1.4 1.1 -3.7 15.0 66.8 77.1 19.5 17.0
of which
Precious Metals 1.4 -1.8 4.7 6.9 1.4 13.3 27.3 25.8 12.5 8.2
Base Metals 0.3 -0.8 -0.7 -0.9 -0.5 0.9 3.9 5.7 1.0 1.7
Agriculture 0.6 -2.1 -2.7 -2.3 -2.3 0.8 15.4 16.4 0.5 3.4
Energy 1.4 -2.9 -2.7 -2.6 -2.3 -0.1 20.2 29.2 5.4 3.7
Figure 33: Estimate of index flows

(US $bn) Jan-12 Dec-11 Q4 11 Q3 11 Q2 11 2011 2010 2009 2008 2007
Barcap estimates of indices 1.5 -6.2 -4.4 -5.0 -5.0 -4.6 33 26 -11 -7.7
of which
Precious Metals 0.2 -0.9 -0.7 -0.8 -0.7 -1.0 3.6 2.5 -0.9 -0.6
Base Metals 0.1 -0.4 -0.3 -0.3 -0.3 -0.2 2.1 1.4 -0.5 -0.3
Agriculture 0.5 -2.1 -1.4 -1.9 -1.7 -1.4 12.0 9.0 -3.9 -2.7
Energy 0.7 -2.8 -2.1 -2.0 -2.3 -1.9 15.3 12.9 -5.7 -4.0
Source: Bloomberg, Barclays Capital
Figure 34: Exchange-traded products (ETP) flows

(US $bn) Jan-12 Dec-11 Q4 11 Q3 11 Q2 11 2011 2010 2009 2008 2007
Barcap estimates of ETPs 1.8 -2.8 0.9 4.3 -1.8 9.7 24 43 19 11
of which
Broad-based Indices 0.4 0.0 -2.1 -1.4 -0.5 -0.2 3.3 10.5 0.4 2.0
Precious Metals 1.1 -1.5 4.9 7.0 1.2 12.4 21 20 12 7.3
Base Metals 0.0 0.0 -0.1 -0.3 -0.2 -0.2 0.2 2.1 0.1 0.2
Agriculture 0.0 -0.3 -0.8 -0.5 -1.1 -0.1 -0.1 2.1 0.7 1.6
Energy 0.3 -1.0 -1.0 -0.5 -1.2 -2.4 -0.8 7.6 6.2 0.4
Source: Bloomberg, ETP issuer data, Barclays Capital
Figure 35: Medium term notes (MTN) flows

(US $bn) Jan-12 Dec-11 Q4 11 Q3 11 Q2 11 2011 2010 2009 2008 2007
Monthly Issuance Monthly data Quarterly data Annual data
Barcap estimates of MTNs 0.4 0.5 2.1 1.8 3.1 9.8 10.1 8.4 11.1 13.2
of which
Broad-based Indices 0.14 0.20 1.06 0.84 1.48 4.8 6.1 4.5 5.1 6.4
Commodity Basket 0.03 0.13 0.47 0.46 0.51 1.9 1.2 0.8 2.1 3.2
Precious Metals 0.12 0.11 0.36 0.27 0.42 1.3 1.7 1.4 0.7 0.5
Base Metals 0.01 0.00 0.00 0.03 0.15 0.4 0.3 0.1 0.4 0.3
Agriculture 0.00 0.02 0.02 0.01 0.10 0.2 0.1 0.2 1.3 0.9
Energy 0.11 0.04 0.22 0.18 0.41 1.1 0.7 1.3 1.4 1.9
Source: MTN-i, Barclays Capital
29 February 2012 18
Figure 36: Total commodity assets under management Figure 37: Total commodity investment inflows
450 Institutional and retail commodity AUM ($bn) 35 Quarterly flows into commodities ($bn)
400 Medium term notes 30 Inflows into ETPs and MTNs
Estimated inflows into commodity indices
350 Exchange traded products 25 Net flows
300 Commodity index swaps 20
250 15
200 10
150 5
100 0
50 -5
0 -10
Q4 05 Q4 06 Q4 07 Q4 08 Q4 09 Q4 10 Q4 11 Q4 05 Q4 06 Q4 07 Q4 08 Q4 09 Q4 10 Q4 11
Source: Bloomberg, MTN-i, ETP issuer data, Barclays Capital Source: Bloomberg, MTN-i, ETP issuer data, Barclays Capital
Figure 38: ETP assets under management Figure 39: US and Europe ETP flows
250 Commodity-linked ETP AUM by sectors ($bn) 12 Monthly flows into US and Europe ETPs ($bn)
10
Energy Europe
200 8
Others US
Precious 6
150
4
2
100
0
50 -2
-4
0 -6
Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12
Source: Bloomberg, ETP issuer data, Barclays Capital Source: Bloomberg, ETP issuer data, Barclays Capital
Figure 40: Commodity index swaps AUM Figure 41: All index-linked AUM (swaps, ETPs and MTNs)
200 Commodity index swap AUM by sector ($bn) 300 CFTC and Barclays Capital estimates of index-
Energy linked AUM ($bn)
250
Agriculture
150
Base metals 200 Barclays capital
Precious Metals
CFTC
100 150
100
50
50
0 0
Sep-04 Jul-06 May-08 Mar-10 Jan-12 Sep-04 Jul-06 May-08 Mar-10 Jan-12
Source: Bloomberg, CFTC, Barclays Capital Source: Bloomberg, CFTC, Barclays Capital
29 February 2012 19
CFTC DATA: POSITIONS BY MARKET

In this section, we present a breakdown by market of managed money and swap dealer positioning data, reported weekly by the
US Commodities Futures Trading Commission.
Figure 42: Commitments of traders – managed money overview

Futures Net Long Futures and Options
Managed Money as % of Open Interest Total Futures Open Interest Futures Net Long Net Long
All-time
21 Feb 12 Current High/Low Current 1 mth ch Current 1 mth ch Current 1 mth ch
Platinum Nymex 47% 62% 44.6 0.5 21.1 6.2 21.0 5.9
Palladium Nymex 46% 60% 20.9 2.8 9.5 3.8 9.5 3.9
Orange Juice ICE 40% 58% 22.8 -3.6 9.2 -4.9 8.5 -3.8
Feeder Cattle CME 38% 43% 54.7 11.4 20.9 4.3 21.0 3.9
Gold Comex 35% 45% 456.7 29.6 160.3 43.1 179.1 52.2
Gasoline Nymex 26% 27% 353.8 15.6 91.6 14.3 90.4 13.4
Live Cattle CME 24% 36% 357.6 22.0 86.1 19.9 97.5 21.0
Wheat MGEX 24% 30% 38.5 -3.4 9.2 0.4 9.1 0.4
Silver Comex 23% 35% 110.6 7.6 25.9 11.0 28.0 12.0
Lumber CME 19% 46% 10.0 0.4 1.9 2.8 1.9 2.8
Soybeans CBOT 16% 27% 544.1 65.8 88.0 47.9 97.0 51.6
WTI Nymex 15% 17% 1441.5 99.7 215.8 40.4 259.2 55.1
Corn CBOT 15% 26% 1312.5 98.1 191.0 40.6 182.9 21.1
Heating Oil Nymex 14% 17% 314.3 35.8 43.2 9.9 43.2 10.0
Sugar ICE 14% 26% 699.1 62.4 96.1 7.2 98.9 5.4
Lean Hogs CME 13% 27% 258.9 9.0 32.9 5.3 33.2 5.2
Copper Comex 8% 23% 162.5 19.8 13.3 6.0 13.3 5.9
Wheat KBOT 8% 31% 141.4 -4.6 11.3 6.1 11.3 6.1
Soybean Meal CBOT 7% 33% 183.6 -18.4 12.6 22.5 14.8 23.8
WTI ICE 7% 9% 370.4 10.9 24.5 -2.0 24.9 -2.3
Soybean Oil CBOT 6% 27% 313.8 -1.6 17.4 39.0 27.6 40.4
Oats CBOT 5% 37% 11.4 -2.3 0.5 1.5 0.5 1.5
Cotton NYBOT -1% -20% 172.4 7.4 -1.9 -23.5 -1.2 -26.2
Coffee ICE -2% -22% 130.0 13.7 -2.0 -10.4 -2.4 -10.2
Cocoa ICE -5% -15% 163.0 -8.5 -7.4 0.1 -7.6 1.3
Natural Gas Nymex -6% -25% 1252.9 100.4 -70.8 10.9 -70.2 10.1
Rough Rice CBOT -11% -18% 15.2 1.0 -1.6 0.4 -1.6 0.4
Wheat CBOT -12% -12% 463.8 -1.0 -54.7 -7.4 -57.3 -8.4
Total 11% 9421.2 570.5 1044.0 295.4 1132.7 302.4
Note: This table ranks key commodities markets by the percentage of total open interest accounted for by managed money in the weekly US Commodities Futures
Trading Commission “Commitments of Traders” report. First column total reflects a weighted average. All-time high/low is based on data since mid-2006 and since 8
December 2009 for platinum, palladium and MGEX wheat. Source: CFTC (‘000 lots unless otherwise stated)
Figure 43: CFTC managed money positions in major US Figure 44: CFTC managed money positions as a percentage of
commodity futures markets (‘000 lots) total open interest in major US commodity futures markets
2500 Long Short Net 11000 Open interest ('000 lots) 18%
Percentage of open interest
2000 10000 15%
1500 9000
12%
1000 8000
9%
500 7000
6%
0 6000
-500 5000 3%
-1000 4000 0%
Feb-08 Feb-09 Feb-10 Feb-11 Feb-12 Feb-08 Feb-09 Feb-10 Feb-11 Feb-12
Source: CFTC, Barclays Capital Source: CFTC, Barclays Capital
29 February 2012 20
A ‘swap dealer’ is an entity that deals primarily in swaps for a commodity and uses the futures markets to manage or hedge the
risk associated with those swaps transactions. The swap dealer’s counterparties may be speculative traders, such as hedge funds
or traditional commercial clients who are managing risk arising from their dealings in the physical commodity.
Figure 45: Commitments of traders – swap dealer overview

Futures Net Long Futures and Options
Swap Dealers as % of Open Interest Total Futures Open Interest Futures Net Long Net Long
All-time
21 Feb 12 Current High/Low Current 1 mth ch Current 1 mth ch Current 1 mth ch
Wheat CBOT 35% 45% 463.8 -1.0 164.0 -1.7 166.2 -0.6
Soybean Oil CBOT 29% 37% 313.8 -1.6 92.1 0.5 90.7 0.4
Cotton ICE 28% 47% 172.4 7.4 47.5 11.3 47.0 10.5
Live Cattle CME 26% 43% 357.6 22.0 91.6 3.9 92.3 4.4
Lean Hogs CME 26% 45% 258.9 9.0 66.1 1.3 68.8 2.8
Copper Comex 23% 47% 162.5 19.8 36.9 -3.0 36.9 -3.0
Wheat KBOT 21% 26% 141.4 -4.6 30.4 1.9 30.6 1.8
Soybeans CBOT 21% 34% 544.1 65.8 114.3 -9.0 117.1 -6.6
Lumber CME 21% 37% 10.0 0.4 2.1 0.1 2.1 0.1
Corn CBOT 20% 35% 1312.5 98.1 259.9 6.9 249.4 9.2
Oats CBOT 19% 24% 11.4 -2.3 2.2 0.2 2.2 0.2
Coffee ICE 16% 41% 130.0 13.7 21.1 1.3 20.8 1.4
Sugar ICE 15% 30% 699.1 62.4 103.9 32.3 96.8 31.2
Rough Rice CBOT 13% 23% 15.2 1.0 1.9 0.0 1.9 0.0
Natural Gas Nymex 10% 27% 1252.9 100.4 125.7 -28.5 122.8 -30.3
Orange Juice ICE 9% 16% 22.8 -3.6 2.1 -0.1 2.1 -0.1
Heating Oil Nymex 9% 30% 314.3 35.8 27.8 -0.5 29.9 -0.5
Palladium Nymex 9% 19% 20.9 2.8 1.8 0.0 1.8 -0.1
Soybean Meal CBOT 8% 11% 183.6 -18.4 14.8 -4.0 14.5 -4.4
Feeder Cattle CME 7% 24% 54.7 11.4 4.0 -0.1 3.9 -0.1
Silver Comex 6% 18% 110.6 7.6 6.7 -5.0 3.3 -5.6
Wheat MGEX 6% 7% 38.5 -3.4 2.3 1.9 2.6 2.0
Gasoline Nymex 6% 27% 353.8 15.6 19.8 -2.3 21.4 -1.0
Cocoa ICE 5% 14% 163.0 -8.5 7.5 5.1 7.3 3.1
Gold Comex -8% -23% 456.7 29.6 -35.8 -27.7 -57.6 -34.2
WTI ICE -8% -13% 370.4 10.9 -29.6 14.9 -31.2 15.6
WTI Nymex -13% -13% 1441.5 99.7 -180.3 -60.6 -244.2 -66.1
Platinum Nymex -21% -39% 44.6 0.5 -9.5 -2.9 -9.8 -2.7
Total 11% 9421.2 570.5 991.5 -63.8 889.8 -72.6
Note: This table ranks key commodities markets by the percentage of total open interest accounted for by swap dealers in the weekly US Commodities Futures
Trading Commission “Commitments of Traders” report. First column total reflects a weighted average. All-time high/low is based on data since mid-2006 and since
8 December 2009 for platinum, palladium and MGEX wheat. Source: CFTC (‘000 lots unless otherwise stated)
Figure 46: CFTC swap dealer positions in major US Figure 47: CFTC swap dealer positions as a percentage of
commodity futures markets (‘000 lots) total open interest in major US commodity futures markets
2500 Long Short Net 10000 Open Interest ('000 lots) 22%
Percentage of open interest
2000 9000 20%
1500
8000 18%
1000
7000 16%
500
6000 14%
0
-500 5000 12%
-1000 4000 10%

Feb-08 Feb-09 Feb-10 Feb-11 Feb-12 Feb-08 Feb-09 Feb-10 Feb-11 Feb-12
Source: CFTC, Barclays Capital Source: CFTC, Barclays Capital
29 February 2012 21
COMMODITY STRATEGY
Will it last?
The strength of the commodity price rally since the start of the year has taken most market
participants by surprise. The key questions revolve around whether it continues or not.
Should one take out a long position and risk a reversal in momentum or stay on the
sidelines and get left behind if markets continue to surge?
We do expect a steady grind higher for commodity assets as a whole over the next few
months, but there are likely to be some twists and turns along the way. Dips will come, and
when they do, they should represent good buying opportunities, in our view, particularly in
base and precious metals, which we expect to be the strongest performing commodity
markets this year.
The big drivers of the commodity rally so far this year have been three-fold.
First, concerns about the health of the global economy have eased. Economic data have
proved much stronger than expected, while threats to the banking system and wider
contagion resulting from the European sovereign debt crisis have receded. Since the
publication of our most recent report, the Chicago PMI came in stronger than expected,
showing a solid expansion in February activity. Also, the US Q4 real GDP growth was revised
up to 3%, above the consensus forecast. Similarly, economic data have also improved in
China. The increase in the February HSBC flash PMI points to a cautiously easing stance in
the beginning of the year that will bottom out some time in H1.
However, the signs are that markets have now recalibrated to a more positive growth
outlook, so it will probably require further significant improvements to maintain the upward
trend in risk assets. Our data surprise index for the US suggests that the year started with a
concentration of good economic news relative to expectations. However, since mid-
February, positive news are no longer “surprising” to the upside. Consistent with this, the
strength of base metals markets has dissipated. In January, markets such as zinc and lead
were up 13% and 17%, respectively, putting them amongst the strongest of all commodity
markets and contributing to base metals sub-indices gaining about 10-11%. However, since
then, base metals have been flat to down (with the exception of aluminium, which has been
supported by rising oil prices).
An additional negative for base metals markets is the concern that China imported more
metal than it needed in late 2011/early 2012. Shanghai exchange stocks have risen for key
metals such as copper local prices and premiums have recently softened. Base metals are
likely to underperform other commodities markets for a while, in our view, until indicators
from China start to improve again.
The second key driver is that commodity investors have begun allocating to commodities
again after beginning 2012 heavily underexposed to the sector. Our recent survey of
institutional investors (see focus) showed that the allocations to commodities in early 2012
were less than 50% of their target after having cut their exposures in late 2011. Since then,
there has been a significant rebound in allocations via index swaps and ETPs (especially for
precious metals). Hedge funds have also raised their exposure levels. CFTC data show that
net long hedge fund positions across all US commodity futures markets have risen by
almost 295,000 lots (39%) in the past four weeks, with especially large increases in
soybeans, gold, WTI, corn and soybean oil and much smaller cuts in coffee and cotton.
29 February 2012 22
Despite the rebound, institutional and hedge fund exposure to commodities is still relatively
low. For institutions the $3.7bn of fresh inflows in January is less than a third of the $12bn
that was withdrawn from commodities during Q2-Q4 11. For hedge funds net long
positions currently account for just 11% of total open interest in commodities compared
with 15% this time a year ago. As long as the macroeconomic environment and commodity
fundamentals continue to improve, investor buying should continue to be a positive for
commodities.
The third factor is that weather and geopolitics have emerged as key drivers of agriculture
and oil markets again. For oil, concerns about a closure of the Straits of Hormuz have
receded for now, but the combination of sanctions on Iranian oil exports and lost
production in a number of smaller non-OPEC producers is leading to a distinct tightening in
oil markets. With little spare capacity available to the market and global oil inventories
considerably below their seasonal norms, an upward grind in oil prices seems likely to
continue, and we see further upside risk to prices from current levels.
In agriculture, the key issue is cuts to harvest estimates for Brazil and Argentina – a remnant
of the La Nina effect, which has brought very dry weather to South America since late last
year. We expect the La Nina effect to dissipate throughout 2012, and we are negative on
agricultural commodity price prospects further ahead. However, we expect further cuts to
come in corn and soybean supply projections for the 2011-12 South American harvests. As
a result, these markets could experience further price appreciation over the next month or so.
So will it last? The answer is a qualified yes, though for the next month or so it looks likely
that oil, corn and soybeans markets will outperform base and precious metals. This does
not change our view for the rest of 2012 as a whole that these metals will be the strongest
performers this year, and we would advise buying on price dips especially palladium, tin,
lead, zinc, copper and gold.
We are opening a several new trades this month.
First, we are initiating a long position in the December 2012 NYMEX palladium contract. The
rationale for this is as follows:
Palladium has potentially the weakest supply outlook in 2012 of any commodity we
forecast. We project a 2.1% decline in global supply.
The main driver of this is the exhaustion of Russian stockpiles, sales from which over the
past five years have averaged 1m oz/year, equivalent to 12% of annual global demand.
We forecast stockpile sales at 300oz in 2012, less than half last year’s total. Russian
exports in January are down 50% y/y, consistent with the state stockpile manager
Gokhran’s recent statement that “only a little” palladium will be exported this year.
After hefty disinvestment last year (-1/2m oz), we forecast a rebound in net investment
buying of palladium in 2012 (+125k oz). Promisingly, ETP flows turned positive again so
far this year (up 138koz ytd), which suggests upside risk to investment demand. We
expect net investment flows to remain positive for the full year, as less committed
interest already exited the market last year.
Non-investment demand from the auto sector in 2012 is set to benefit from the ongoing
substitution of palladium for platinum in diesel vehicles, as well as healthy underlying
demand, albeit softer y/y, from key gasoline biased regions such as China and the US.
29 February 2012 23
We forecast strong growth in autocatalyst demand in 2012 (+5.5% y/y), which should help
swing the palladium market from a 1m oz surplus in 2011 to a 140k oz deficit in 2012.
We forecast a fourth quarter average price of $895/oz, compared with recent December
2012 futures contract values of less that $700/oz.
Second, we are initiating a long position in fuel oil versus gasoil differentials with a short
position in ICE Q4 13 gasoil and a long position in Rotterdam Q4 13 3.5% fuel oil (note that
this is an over-the-counter market). We favour 2013 exposure for this trade as positioning is
already heavy for the back end of 2012, and there is a better risk/reward to going further
out the curve.
The long-running push to reconfigure refineries globally to maximise the production of

light products, such as jet fuel and gasoline, is coming at the expense of fuel oil output.
About 200kbpd of US fuel oil capacity was shut down in late 2011, with a further
110kbpd expected to be closed this year, as well as reductions totaling about 1.5m bpd
from Spain and India.
On top of this, the Russian government is encouraging the upgrading of its domestic
refining capacity by removing the tax discount on fuel oil. Russia currently supplies the
global market with about 3m bpd of fuel oil exports, and this is likely to decline rapidly
starting toward the end of 2012.
Adding the above actual and potential supply shortfalls – a quantity of supply equivalent
to almost half of global fuel oil demand, which is about 9mbpd – is under threat.
On the demand side, fuel oil demand is in decline globally for environmental reasons
and due to cheaper gas replacing fuel oil in power generation. On average, global
demand has fallen 3% annually since 2006.
However, that trend halted in 2011 due to stronger demand from the rapidly expanding
dry bulk carrier and tanker fleets and an increase in Japan’s consumption of fuel oil to fill
the gaps in its electricity generating sector caused by nuclear plant closures.
This year, we expect further strong growth in the dry bulk (+9% y/y) and tanker fleets
(+6% y/y), which would boost fuel oil demand further.
We also expect Japan’s fuel oil demand to remain high. Current LSFO consumption in
Japan for electricity generation is estimated at 410bpd. Although two plants that were
amongst the first to shut down last year have passed stress tests, allowing them to
eventually restart once approvals have been granted, most of Japan’s 54 nuclear plants
are still closed, with the remaining three that are still operating scheduled to shut by May.
Finally, we are implementing a short position in the December ICE coffee contract.
After a 6.3% increase in global supply in the 2010-11 marketing year (the coffee
marketing year runs from October to September), we estimate further growth in
production in the current marketing year for 2011-12 of 1.5%.
While Brazil faces an “off-year” crop (there is a biennial cycle to the Brazilian coffee crop
in which yields decline every other year), its output is slated to be a record for an off-
year crop at 44.5m 60kg bags, versus 39.5m in the last off-year in 2009-10 and 48.1m
in the last “on year”.
29 February 2012 24
Production prospects into 2012-13 also look favourable with Brazil returning to an on-
year crop and resulting in potentially a double-digit increase in global supply (contingent
on no abnormal weather conditions).
Global coffee demand is more highly leveraged to trends in the mature economies than
is the case for most other commodities, with the slow growing EU, Japanese and US
markets accounting for 50% of global demand. By contrast, China accounts for less
than 1% of global consumption. Brazil is the largest single emerging market consumer
of coffee, but it only accounts for 14% of global consumption.
We expect only sluggish consumption growth in 2011-12 at 1.3% (compared with an

average of 2.1% over the past four years), with consumption in the EU expected to
contract and to grow only slowly in the US (the world’s largest consumer).
Coffee prices rallied strongly in Q3 11 and have since fallen 27% since their peak, but
are still more than 50% above their 2010 lows. Our fourth quarter average price forecast
for the front-month price is 170c, compared with the current value of the Dec. 2012 ICE
contract of 213c.
Risks to this trade stem from lower global coffee inventories, so if demand turns out to
be much stronger than we expect or there are major downward revisions to crop
estimates, prices could be stronger than we forecast.
As usual, these positions will be opened at closing prices on the day this report is published.
29 February 2012 25
Figure 48: Key recommendations

Current price Gain/Loss
Contract Entry Date Entry price (February-28-2012) Unit $ %
Open trades
Rationale: We see crude oil price risks moving to the upside once again and expect far-forward prices to benefit, with our long-term price forecast for Brent pegged at
$135/bbl.
Long Brent crude oil Dec-15 27/01/2011 98.2 96.9 $/bbl -1.3 -1.3%
Rationale: China's rising capital and energy costs for aluminium suggest a production slowdown ahead. Meanwhile, demand continues to grow very strongly and incentive
prices for producers are rising.
Long LME aluminium Dec-15 29/03/2011 2884 2635 $/t -249.0 -8.6%
Rationale: We remain positive on corn prices with concerns on recent dry weather in South America and its impact on yields; poor US crop ratings and a decline in US
harvested acres while global inventory levels remain extremely low.
Long CBOT corn Mar-12 21/11/2011 605 654 c/Bsh -9.3 -0.8%
Rationale: Stocks are declining and Chinese buying has picked up. The picture for raw materials is tight, with a narrowing in scrap discounts and the continued
underperformance of the supply side.
Long LME copper Jun-12 21/11/2011 7328 8604 $/t -462 -1.8%
Rationale: Despite the turnaround of the Seaway pipeline, we see an opportunity to sell WTI time spreads in Q1 next year as the collapse of attractive margins may bring
forward some refinery maintenance, which have now all piled up during Q3 12, and thus risk oversupply in the US Midwest.
WTI contango widening 19/07/2011 0.38 0.71 0.33 -
Short position Mar-12 100.4 105.8 $/b -5.44 -
Long position Apr-12 100.8 106.6 $/b 5.77 -
Rationale: US (the world's largest producer) has seen recent supply downgrades with production down y/y. Chinese import buying has been muted, but activity has picked up
in recent weeks after the decline in international prices. China's production is down y/y and we expect imports to move higher.
Long CBOT soybeans Mar-12 20/12/2011 1155 1305 c/Bsh 150.8 -5.4%
Rationale: We anticipate a move into backwardation at the front-end of the curve due to a move up in China's import demand alongside poor supply performance.
Copper spreads tightening 21/11/2011 -17.3 -8.5 -9.0 -
Long position Mar-12 7317 8606 $/t 1289 -
Short position Sep-12 7334 8614 $/t -1280 -
Rationale: Our expectation of stable crude oil prices should support US gasoline demand at reasonable levels in 2012, but a substantial loss in refining capacity is set to
squeeze supplies. As a result, summer gasoline prices should increase.
US gasoline (RBOB) spread tightening 20/12/2011 -0.11 0.05 0.16 -
Long position Aug-12 2.51 3.12 $/g 0.60 -
Short position Sep-12 2.63 3.07 $/g -0.44 -
Note: The long position on COMEX gold was originally opened on 11/05/2010 and includes losses/gains from two previous trades (Dec-2010 and Dec-2011).
The long position in copper was originally opened on 25/05/2011 and includes losses from the previous trade (Dec-2011).
The long position in corn was originally opened on 20.04/2011 and includes losses from the previous trade (Dec-2011).
Source: Reuters, Barclays Capital
Figure 49: Recent trade history

Gain/Loss
Closed Trades Contract Entry Date Exit Date Entry price Exit price Unit $ %
Directional trades
Short US nat gas Henry Hub Oct-13 21/11/2011 20/12/2011 4.4 4.1 $/mmbtu 0.3 6.6%
Long COMEX gold** Dec-12 21/11/2011 20/12/2011 1694 1628 $/oz -66 29.3%
Long Carbon EUA Dec-11 24/02/2011 30/06/2011 15.4 13.5 €/t -1.9 -12.1%
Long KBOT wheat ** Dec-11 20/04/2011 30/06/2011 964 733 c/Bsh -231 -26.4%
Long UK natural gas Q3-11 29/03/2011 26/05/2011 63.9 58.5 p/therm -5.4 -8.5%
Long LME nickel Jun-11 24/02/2011 26/05/2011 27501 22821 $/t -4680 -17.0%
Long European delivered coal (API2) ** Apr-11 27/01/2011 29/03/2011 114.5 125.7 $/t 16 14.4%
Short Comex silver Dec-11 27/01/2011 24/02/2011 27.1 33.1 $/oz -6 -22.4%
Long LME copper Jun-11 22/09/2010 24/02/2011 7833.0 9505 $/t 1672 21.3%
Long CBOT corn ** Mar-11 26/11/2010 24/02/2011 553.0 685.8 c/Bsh 245 55.1%
Short UK natural gas Summer 2011 19/10/2010 27/01/2011 47.2 52.5 p/therm -5 -11.3%
Long NYMEX crude oil ** Dec-11 19/10/2010 27/01/2011 84.8 99.3 c/bbl 12.1 14.2%
Short US natural gas Dec-11 13/08/2010 26/11/2010 5.54 5.12 $/mmbtu 0.43 7.7%
Long ICE cotton Dec-10 14/04/2010 19/10/2010 75.7 110.3 c/lb 35 45.7%
Long LME lead Dec-10 21/06/2010 13/08/2010 1851 2065 $/t 214 11.6%
Long LME copper ** Sep-10 10/12/2009 13/08/2010 7062 7143 $/t 345 5.0%
Long NYMEX palladium Jun-10 22/02/2010 11/05/2010 444 532 $/oz 88 19.8%
Long ICE sugar Jul-10 18/03/2010 14/04/2010 22.6 17.7 c/lb -5 -21.6%
Long LME Nickel Jun-10 10/12/2009 18/03/2010 16331 22760 $/t 6429 39.4%
Long NYMEX crude oil May-10 10/12/2009 18/02/2010 75.4 79.1 $/b 3.7 4.9%
Long ICE sugar Mar-10 10/12/2009 18/02/2010 23.3 26.5 c/lb 0.03 13.8%
Spread trades
Natural gas spread widening 15/12/2010 30/06/2011 0.63 0.41 $/mmbtu -0.22 -
Short forward Henry Hub Oct-11 4.49 4.43 $/mmbtu 0.05 -
Long forward Henry Hub Jan-12 5.12 4.84 $/mmbtu -0.27 -
Crude oil spread tightening ** 20/04/2011 26/05/2011 -0.36 -0.37 $/b 0.34 -
Long forward Brent crude Jul-11 123.5 115.1 $/b -8.45 -
Short forward Brent crude Aug-11 123.1 114.7 $/b 8.46 -
Gasoil spread tightening 22/09/2010 19/10/2010 -16.8 -15.3 $/t 1.50 -
Long nearby ICE gasoil Dec-10 669.75 705.50 $/t 35.75 -
Short further forward ICE gasoil Jun-11 686.50 720.75 $/t -34.25 -
US Henry Hub natgas 21/06/2010 13/08/2010 0.66 0.65 $/mmbtu 0.01 -
Short position Oct-10 5.01 4.35 $/mmbtu -0.66 -
Long position Jan-11 5.67 5.00 $/mmbtu 0.67 -
Note: Entry and exit prices reference closing prices on the day of publication. **These trades include gains/losses from previous trades.
Source: Reuters, Barclays Capital
29 February 2012 26
COMMODITY INVESTMENT PERFORMANCE
(Un)expected strong start

The year started strongly for commodities, particularly base and precious metals, which
experienced a rally following last year’s sharp liquidation. The S&PGSCI base metals gained
10.1%, its strongest performance since December 2010, while the S&PGSCI precious metals
was up 12%, its largest increase since November 2009. In our latest Global Outlook
(Opportunity knocks, cautiously, 8 December 2011), we highlighted the potential for a
strong price rebound in early 2012 and advocated cautious rebuilding of long positions in
markets such as copper and platinum group metals. We remain positive on base metals,
where we see incipient signs of stabilisation in demand momentum towards the end of Q1
and into Q2; as a result, we recommend positioning in those markets.
Which sources of return have driven commodities performance in the year-to-date? So far
this year, there has been an outperformance of value risk premia strategies, particularly
backwardation long-only strategies. This strategy has outperformed the passive benchmark
by 1.1% on the year-to-date. All other strategies have underperformed their respective
benchmarks. The largest underperformance is in curve strategies.
In terms of curve strategies, positions at the front-end have performed best so far this year.
Indeed, static curve strategies that enable investors to invest on a fixed point out on the
curve have clearly underperformed the front end by up to 1.8% in the case of the S&PGSCI
and up to 1.3% for the DJ-UBS. That said, there was a big change between January and
February. Deferred strategies did outperform in January, when the best point on the curve
was the 4-month deferred enabling investors to outperform the front by up to 0.5%.
However, at the commodity market level, energy markets showed the largest
outperformance out on the curve in January. In particular, investing in the 3-month contract
for Brent crude oil, WTI, gas oil and natural gas yielded an average of 2% more than
investing in the front. Agriculture markets (such as cocoa and cotton) and livestock (such
as feeder cattle) outperformed out on the curve in January.
Figure 50: Negative roll yields continued to shrink Figure 51: Value long-only strategies have outperformed so
far in 2012
1% Roll yield S&PGSCI Selected commodity strategy returns
0% Value (long only)
-1%
Liquidity (S&PGSCI)
-2%
Trend (DJ-UBS)
-3%
-4% Value (long/short)
-5% Liquidity (DJ-UBS)

Q4 11
-6%
Curve (S&PGSCI) YTD 2012
-7%
Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 -2% 0% 2% 4% 6% 8% 10%
Source: Ecowin, Barclays Capital Source: Ecowin, Barclays Capital
29 February 2012 27
The price rally in January meant that dynamic spread strategies (short the front and long a
point on the curve) did not perform well. Our short-front and long 3-month strategy was up
0.3% in January. The main contributor to this poor performance was the flattening of the
wheat futures curve, with the front end of the curve rising more than the back end. On the
other hand, the sharp decline in front-end natural gas prices and the increase at the back
end of the WTI curve contributed positively to returns.
Liquidity timing risk premia startegies underperformed their respective passive benchmarks
late last year when there were large outflows from commodities. This trend started to
change in January, when liquidity timing strategies matched or slightly outperformed the
benchmarks. However, the trend reversed again in February, and in the year-to-date,
liquidity timing strategies have considerably underperformed benchmarks. This source of
return is highly linked to flows into commodities markets, and we do expect liquidity to
consolidate itself as a source return for commodities this year as inflows pick up.
Value and liquidity to outperform We expect the value risk premia strategies (backwardation long only) and the liquidity risk
as a source of return premia strategies to outperform this year. Our view of 2012 as a “beta year” for
commodities fits in with the outperformance of value as a source of return for commodity
investors. This is also consistent with our expectation of significant upside potentials across
a number of commodities markets (particularly base and precious metals).
Trend to underperform as a On the other hand, we expect trend to underperform as a source of return. So far this year,
source of return there has been a marked improvement in sentiment, but there are still lots of unknowns. We
expect the recovery to be a bumpy one and do not rule out further volatility from the
European debt situation or concerns about a China hard landing. As a result, trends are
likely to be less clear across a number of markets, particularly those most linked to the
global economic cycle such as base metals.
We expect the performance of curve risk premia strategies to be mixed, with

outperformance in some sectors such as agriculture and energy. In natural gas, the larger-
than-anticipated oversupply along with mild winter weather suggests the front end of the
curve will likely underperform in the next months. In crude oil, WTI moved from contango
to backwardation last year and back into contango this year. Brent is in backwardation, but
given the relative larger weight of WTI, crude oil might still have a positive contribution to
curve strategies. Furthermore, a warm winter and a series of extremely weak OECD demand
indications have paved the way for further downgrades to short-term demand and demand
expectations. However, increasing geopolitical tensions, tight supply and the need for
higher average prices by OPEC countries to balance their budgets will likely keep the back
end of the curve fairly stable. With regards to agriculture, we remain relatively bearish on
price trends for this year – more for softs than for grains. As a result, we recommend
investors shift their exposure further down along the curve to protect themselves from
nearby price declines.
29 February 2012 28
Figure 52: Benchmark indices for selected asset classes

Monthly and quarterly returns Returns (annualised)
Jan-12 Q4 11 Q3 11 Q2 11 YTD '12 2011 Last 5 years Start of data

Commodity Indices
S&P GSCI Composite Index TR 2.2% 9.0% -11.7% -7.9% 8.4% -1.2% -1.2% 9.5%
DJ-UBS Composite Index TR 2.5% 0.3% -11.3% -6.7% 5.7% -13.3% -1.6% 5.4%
Rogers International Index (RICI) TR 3.4% 4.7% -11.8% -8.2% 8.2% -6.9% 2.7% 10.1%
Other asset classes
S&P 500 Composite Index TR 4.5% 11.8% -13.9% 0.1% 9.5% 2.1% 0.8% 8.8%
S&P BRIC 40 Index TR 13.4% 6.0% -24.7% -3.8% 20.3% -17.5% 6.0% 15.9%
JPM Govt Bond Index TR 0.3% -1.6% 5.8% 3.6% 0.5% 5.4% 4.1% 6.5%
JPM Emerging Markets Bond Index TR -1.4% -0.3% -5.7% 1.2% 0.9% -5.4% 2.4% 10.7%
Europe STOXX Oil & Gas Index TR 0.1% 20.6% -9.8% -4.5% 3.4% 9.5% 2.7% 9.8%
Europe STOXX Food Producers Index TR -2.0% 8.7% -3.3% 6.5% 0.9% 6.4% 7.2% 9.7%
Europe STOXX Basic Resources Index TR 14.1% 12.5% -30.1% -4.2% 14.6% -28.5% -0.2% 11.2%
Europe STOXX Mining Index TR 14.8% 12.7% -27.1% -3.5% 15.2% -25.7% 4.0% 14.2%
HFRX Commodity HF Index -0.9% -3.4% -3.9% -5.2% -0.9% -9.8% 1.6% 6.4%
New Edge Commodity HF Index 1.5% 0.9% -3.1% -2.7% 1.5% -4.0% 4.7% 9.4%
Source: EcoWin, Barclays Capital
Figure 53: Commodity sub-indices

Monthly and quarterly returns Returns (annualised)
Jan-12 Q4 11 Q3 11 Q2 11 YTD '12 2011 Last 5 years Start of data

TM
S&P GSCI Sub-Indices TR
S&P GSCITM Composite Index TR 2.2% 9.0% -11.7% -7.9% 8.4% -1.2% -1.2% 9.5%
S&P GSCITM Energy TR 1.4% 13.4% -13.0% -7.9% 9.3% 4.9% -2.3% 8.5%
S&P GSCITM Industrial Metals TR 10.1% 1.7% -22.5% -2.9% 12.6% -22.3% -2.2% 8.0%
S&P GSCITM Precious Metals TR 12.0% -4.1% 4.3% 2.1% 16.5% 6.6% 18.8% 8.0%
S&P GSCITM Agriculture TR 0.0% 0.5% -8.4% -12.1% 2.7% -15.9% 1.0% 4.5%
S&P GSCITM Softs TR 0.4% -7.5% -8.6% -8.9% 3.6% -15.6% n/a 2.8%
S&P GSCITM Livestock TR 2.5% -3.3% 5.5% -9.8% 2.1% -1.2% -8.6% 7.5%
S&P GSCITM Sub-Indices roll yield
S&P GSCITM Composite Index roll yield -0.2% -0.2% -0.1% -0.1% -0.7% -3.3% -11.7% -0.7%
S&P GSCITM Energy roll yield -0.1% 0.4% 0.2% -0.5% -0.6% -4.0% -14.0% -0.4%
S&P GSCITM Industrial Metals roll yield -0.2% -0.5% -0.5% -0.5% -0.5% -1.4% -2.4% -1.5%
S&P GSCITM Precious Metals roll yield -0.2% -0.1% -0.1% -0.1% -0.2% -0.6% -2.4% -5.8%
S&P GSCITM Agriculture roll yield 0.0% -1.7% -1.0% 1.7% -0.4% -1.0% -9.0% -4.3%
S&P GSCITM Softs roll yield 0.0% -0.3% 1.6% 8.4% 1.0% 11.2% n/a -4.9%
S&P GSCITM Livestock roll yield -3.1% -1.9% 0.7% -0.9% -3.2% -12.1% -15.9% -0.8%
DJ-UBS Sub-Indices TR
DJ-UBSTM Composite Index TR 2.5% 0.3% -11.3% -6.7% 5.7% -13.3% -1.6% 5.4%
DJ-UBSTM Energy TR -3.5% 2.1% -16.3% -8.1% 0.0% -16.0% -14.7% 3.9%
DJ-UBSTM Industrial Metals TR 10.9% 1.5% -22.7% -3.7% 12.1% -24.2% -3.8% 6.1%
DJ-UBSTM Precious Metals TR 12.7% -4.4% 2.3% 0.8% 17.2% 4.6% 19.5% 8.4%
DJ-UBSTM Agriculture TR -0.7% 1.4% -9.0% -9.8% 3.1% -14.4% 4.4% 2.0%
DJ-UBSTM Softs TR -0.7% -5.9% -9.0% -7.5% 1.9% -14.0% 7.8% 2.5%
DJ-UBSTM Livestock TR 2.3% -3.8% 5.9% -10.5% 1.7% -2.3% -10.0% -1.4%
Source: EcoWin, Barclays Capital
29 February 2012 29
Figure 54: Commodity index strategies

Quarterly change Returns (annualised)
Jan-12 Q4 '11 Q3 '11 Q2 '11 YTD '12 2011 Last 5 years Start of data
Static deferred
S&PGSCI 1M deferred 2.3% 8.9% -12.2% -7.9% 6.1% -1.2% 0.7% 11.2%
S&PGSCI 2M deferred 2.5% 9.7% -13.3% -7.4% 6.4% -0.1% 1.9% 13.8%
S&PGSCI 3M deferred 2.5% 9.1% -12.9% -6.9% 6.3% 0.4% 3.8% 15.2%
S&PGSCI 4M deferred 2.7% 9.3% -12.9% -6.3% 6.3% 1.4% 4.8% 16.2%
DJ-UBS 1M deferred 2.7% 0.5% -10.8% -6.6% 3.8% -11.3% 1.4% 11.3%
DJ-UBS 2M deferred 2.8% 0.5% -10.9% -5.7% 3.7% -10.6% 1.9% 13.5%
DJ-UBS 3M deferred 2.8% 0.9% -10.9% -5.7% 3.9% -9.4% 3.4% 14.0%
DJ-UBS 4M deferred 3.0% 1.1% -10.8% -5.0% 3.7% -8.1% 4.4% 15.2%
Dynamic
Pure beta BCI 4.9% 3.8% -9.8% -4.8% 6.9% -3.8% 7.1% 16.9%
Pure beta S&PGSCI 2.4% 9.0% -12.7% -7.0% 6.2% -0.1% 2.9% 14.4%
Pure beta DJ-UBS 2.5% 0.3% -10.7% -5.5% 3.2% -9.9% 2.5% 13.6%
Momentum alpha S&PGSCI 2.7% 9.2% -11.9% -6.2% 7.0% 2.9% 4.6% 15.6%
Momentum alpha DJ-UBS 3.0% 1.1% -10.5% -4.5% 4.2% -7.2% 4.0% 14.5%
Roll yield S&PGSCI 2.8% 9.3% -12.0% -6.5% 6.4% 1.9% 5.5% 16.3%
Multistrategy 2.8% 9.3% -12.0% -6.0% 6.5% 2.7% 5.7% 16.5%
ComBATS 0.3% 0.3% -0.2% 1.6% 0.3% 5.6% 8.7% 12.3%
BCRI 4.7% 4.5% -12.5% -6.0% 7.5% n/a n/a 12.4%
Note: Pure Beta aims to replicate the average price of the front-year futures strip of any commodity market while avoiding parts of the forward curve that are subject to
market distortions. Momentum Alpha dynamically positions exposure across the commodity curve based on historical outperformance. Roll yield strategy dynamically
positions exposure across the commodity curve based on implied roll yields. Multi-Strategy index employs a mixture of different enhanced beta strategies applied to
existing benchmarks. It uses Momentum Alpha for agriculture and live stock, Roll Yield for base metals and energy commodities and nearby for precious metals. Source:
EcoWin, Barclays Capital
Figure 55: Commodity risk premia strategies

Curve risk premia strategy
Index, long 3mth, short 1mth position 0.1% 0.1% -0.5% 1.6% -0.2% 3.4% 4.8% 6.8%
Trend risk premia strategy

Voyager 2.8% -0.2% -8.7% -2.4% 5.0% -4.4% 14.7% 20.1%
Value risk premia strategy

Backwardation index 3.6% 4.2% -11.9% -4.6% 6.1% -5.6% 15.9% 28.6%
Backwardation diversified index 5.9% 2.3% -13.1% -4.6% 7.3% -8.7% 11.9% 25.7%
Backwardation long bias index 4.0% 4.6% -7.8% -4.1% 6.1% 0.5% 18.7% 28.2%
Backwardation long short index 1.7% 3.4% 1.5% 0.0% 4.2% 4.4% 15.9% 16.6%
Liquidity timing risk premia strategy

S&PGSCI pre-pre-roll 2.2% 8.9% -12.1% -8.0% 6.1% -1.4% 0.1% 9.6%
S&PGSCI pre-roll 2.2% 8.9% -12.0% -8.1% 6.0% -1.6% -0.7% 7.9%
DJ-UBS pre-pre-roll 2.6% 0.3% -11.1% -6.7% 3.7% -12.4% 0.5% 9.9%
DJ-UBS pre-roll 2.5% 0.2% -11.4% -6.8% 3.3% -13.2% -0.5% 8.4%
Note: This table classifies commodity returns according to the approach described in “Commodity Markets Investment Insight: Structural Sources of Excess Return”,
in which four risk premia (curve, trend, value and liquidity/timing) were identified as providing separate, low correlation sources of commodity risk and return. The
performance of these risk premia over time is represented by sets of different Barclays Capital Indices. Source: EcoWin, Barclays Capital
29 February 2012 30
PRICES
Figure 56: Commodity price comparisons
Price change Month-ago Price change Year-ago
Commodity 28-Feb-12 (%, m/m) price (%, y/y) Price
Carbon CER ECX €/tonne 5.0 21.3% 4.1 -58.1% 11.8
Lumber CME $/1000 ft 267.7 12.7% 237.5 -7.3% 288.9
Carbon EUA ECX €/tonne 8.8 11.3% 7.9 -43.5% 15.5
Silver OTC $/oz 37.14 9.9% 33.81 9.7% 33.85
Crude Oil ICE $/barrel 121.54 9.0% 111.48 8.6% 111.90
Sugar ICE $/lb 0.26 7.8% 0.24 -19.7% 0.33
Oats CBOT $/bushel 3.2 7.4% 3.0 -13.6% 3.7
Soybeans CBOT $/bushel 13.05 7.1% 12.19 -3.8% 13.57
Soybean Meal CBOT $/bushel 290.1 7.0% 271.1 -26.1% 392.5
Crude Oil NYMEX $/barrel 106.53 7.0% 99.59 9.8% 97.00
Platinum NYMEX $/oz 1,721 6.2% 1,620 -4.8% 1,808
Gas Oil ICE $/tonne 1,009 5.9% 953.2 9.2% 924.4
Rubber TOCOM Y/kg 318.4 5.2% 302.8 -36.3% 499.5
Heating Oil NYMEX $/gallon 3.23 5.1% 3.07 10.2% 2.93
Aluminium Alloy LME $/tonne 2,228 4.4% 2,134 -5.1% 2,347
Palladium NYMEX $/oz 719.9 4.4% 689.6 -9.8% 798.6
UK Natural Gas ICE £/therm 0.7 4.1% 0.7 11.1% 0.6
Gasoline NYMEX $/gallon 3.04 3.8% 2.93 11.5% 2.73
Gold OTC $/oz 1,787 3.0% 1,734 26.8% 1,409.5
UK Power APX €/MWh 46.1 3.0% 44.8 -3.3% 47.6
Azuki Beans TGE JPY/30 Kg 12,220 2.9% 11,870 3.7% 11,780
Aluminium LME $/tonne 2,321 2.4% 2,266 -10.7% 2,599
Wheat CBOT $/bushel 6.62 2.3% 6.47 -15.4% 7.83
Corn CBOT $/bushel 6.54 1.8% 6.42 -9.6% 7.23
Lean Hogs CME $/lb 0.88 1.6% 0.87 -0.9% 0.89
Freight Capesize C4 OTC $/tonne 10.4 1.0% 10.3 15.0% 9.0
Barley WCE C$/tonne 214.0 0.9% 212.0 10.3% 194.0
Copper LME $/tonne 8,600 0.9% 8,525 -13.0% 9,885
Feeder Cattle CME $/lb 1.56 0.7% 1.55 19.7% 1.30
Cocoa ICE $/tonne 2,414 0.3% 2,406 -35.7% 3,757
Wheat KBOT $/bushel 7.00 -0.1% 7.00 -22.5% 9.03
Zinc LME $/tonne 2,123 -1.3% 2,150 -15.8% 2,520
Tin LME $/tonne 24,055 -1.4% 24,400 -25.6% 32,325
Lead LME $/tonne 2,256 -1.7% 2,296 -12.0% 2,565
Rough Rice CBOT $/56 lb bu 14.2 -3.2% 14.6 2.3% 13.9
Coal API4 ICE $/tonne 104.5 -3.7% 108.5 -12.2% 119.0
Cotton ICE $/lb 0.92 -4.1% 0.96 -55.3% 2.05
Coffee ICE $/lb 2.06 -5.2% 2.17 -24.1% 2.72
US Natural Gas NYMEX $/mmbtu 2.52 -5.9% 2.68 -37.5% 4.04
Coal API2 ICE $/tonne 99.0 -7.5% 107.0 -16.6% 118.8
German Power EEX €/MWh 46.5 -7.9% 50.5 -10.0% 51.7
Nickel LME $/tonne 19,765 -8.9% 21,699 -31.8% 28,999
29 February 2012 31
PRICE FORECAST
Figure 57: Quarterly price forecast

Q1 11 Q2 11 Q3 11 Q4 11 Q1 12F Q2 12F Q3 12F Q4 12F
Base Metals (LME cash)
Aluminium US$/t 2,503 2,600 2,399 2,090 2,150 2,250 2,350 2,500
Copper US$/t 9,646 9,137 8,982 7,489 8,000 9,000 9,700 9,300
Lead US$/t 2,605 2,550 2,459 1,983 2,100 2,200 2,350 2,500
Nickel US$/t 26,899 24,165 22,043 18,303 19,250 20,500 20,000 19,750
Tin US$/t 29,950 28,694 24,757 20,853 21,000 23,000 25,000 28,000
Zinc US$/t 2,393 2,250 2,224 1,897 1,950 2,100 2,200 2,300
Base Metal Index^ 266 254 239 201 210 230 243 245
Precious metals
Gold US$/oz 1387 1508 1705 1682 1700 1850 2030 1920
Silver US$/oz 31.9 38.4 38.8 31.8 30.0 34.5 38.0 27.5
Platinum US$/oz 1789 1781 1766 1527 1460 1570 1755 1815
Palladium US$/oz 788 756 747 626 680 745 860 895
Energy
WTI US$/bbl 95 102 90 94 101 112 107 118
Brent US$/bbl 106 117 112 109 110 118 112 121
US Natural Gas US$/mmbtu 4.2 4.4 4.1 3.5 2.9 3.1 3.1 3.3
UK Natural Gas £p/therm 57 58 54 57 55 55 57 70
Agriculture
Cocoa US$/t 3303 3043 2962 2383 2275 2325 2400 2500
Coffee Usc/lb 256 271 256 229 225 210 180 170
Sugar Usc/lb 30.5 24.5 28.7 24.7 24.0 24.2 24.7 25.0
Cotton Usc/lb 180 168 107 95 96 89 85 80
Wheat Usc/bushel 786 745 690 615 655 660 615 590
Corn Usc/bushel 670 731 696 620 640 650 605 575
Soybeans Usc/bushel 1379 1361 1356 1175 1210 1240 1220 1235
Figure 58: Annual price forecast

2007 2008 2009 2010 2011 2012F 2015F Cycle average
Base Metals
Aluminium US$/t 2,640 2,573 1,664 2,172 2,398 2,313 3,000 2,750
Copper US$/t 7,129 6,961 5,148 7,533 8,813 9,000 9,500 6,200
Lead US$/t 2,592 2,093 1,721 2,146 2,399 2,288 3,650 2,700
Nickel US$/t 37,276 21,115 14,604 21,809 22,853 19,875 25,000 19,000
Tin US$/t 14,542 18,500 13,579 20,407 26,063 24,250 30,000 18,000
Zinc US$/t 3,251 1,876 1,654 2,158 2,191 2,138 3,500 2,600
Base Metal Index^ 237.2 204.3 146.2 210 240 232 274 N/A
Precious Metals
Gold US$/oz 697 872 972 1,226 1,571 1,875 1,400 1,125
Silver US$/oz 13.4 15.0 14.6 20.2 35.2 32.5 21 16
Platinum US$/oz 1,304 1,569 1,205 1,610 1,716 1,650 2,200 1,850
Palladium US$/oz 354 348 262 526 729 795 1,200 650
Energy
WTI US$/bbl 72.3 99.7 62 80 95 110 137 95
Brent US$/bbl 72.7 98.4 63 80 111 115 135 95
US Natural Gas US$/mmbtu 7.12 8.90 4.16 4.39 4.03 3.05 4.00 4.0
UK Natural Gas £p/therm 30.0 58.2 31.1 42.2 56.4 59.3 85.0 N/A
Coal API2 US$/t 87 144 71 93 123 102 114 92
Coal API4 US$/t 62 120 66 92 119 102 115 95
Coal Newcastle US$/t 66 128 72 99 120 112 120 97
Carbon (EUA) €/t 20 23 13 15 13 8 15 14
Carbon (CER) €/t 16 17 12 12 10 4 9 7
Agriculture
Cocoa US$/t 1882 2555 2794 2944 2923 2375 3200 N/A
Coffee Usc/lb 117 132 125 163 253 196 180 N/A
Sugar Usc/lb 9.9 12.1 17.7 22.3 27.1 24.5 26 N/A
Cotton Usc/lb 57 64 57 94 138 88 88 N/A
Wheat Usc/bushel 636 798 530 581 709 630 650 N/A
Corn Usc/bushel 373 527 374 427 680 618 620 N/A
Soybeans Usc/bushel 861 1234 1031 1048 1318 1226 1350 N/A
Note: ^Economist Intelligence Unit weight. Base metals prices are LME cash. Precious metals spot prices. WTI: front month NYMEX close. Brent: front month IPE close.
US natural gas: NYMEX front month close. Cocoa, Coffee, Sugar, Cotton: front month ICE close. Wheat, Corn, Soybeans: front month CBOT close. Cycle Average:
denote cost driven estimates of the minimum sustainable price over a business cycle. Source: Barclays Capital
29 February 2012 32
CALENDAR OF KEY COMMODITY DATA RELEASES
Monday Tuesday Wednesday Thursday Friday

27 Feb 28 Feb 29 Feb 01 Mar 02 Mar
Monthly Energy Review out US Durable Goods Orders Dept of Energy Weekly Oil EIA Weekly Natural Gas CFTC Data
this week Data Storage SHFE Aluminium, Copper
US GDP US Auto Sales and Zinc Inventory Data
US Chicago PMI US Construction Spending Euro Area PPI
Euro Area HICP US ISM Mfg Index
Euro Area PMI Mfg Index
Euro Area Flash HICP
05 Mar 06 Mar 07 Mar 08 Mar 09 Mar

US Factory Orders EIA Short-Term Energy Dept of Energy Weekly Oil EIA Weekly Natural Gas CFTC Data
US ISM Non-Mfg Index Outlook Data Storage SHFE Aluminium, Copper
Euro Area GDP ECB Announcement and Zinc Inventory Data
OPEC Monthly Oil Market
Report
USDA WASDE Report

Preliminary (February) China FOMC Meeting Dept of Energy Weekly Oil EIA Weekly Natural Gas CFTC Data
Commodity Data out this Announcement Data Storage SHFE Aluminium, Copper
week (National Bureau of IEA Oil Market Report US Empire State Mfg and Zinc Inventory Data
Statistics) Euro Area HICP US PPI US CPI
OECD Main Economic Euro Area IP US Philly Fed Survey US IP
Indicators BoJ MPB Minutes US Consumer Sentiment
BoJ Announcement

Dept of Energy Weekly Oil EIA Weekly Natural Gas CFTC Data
Data Storage SHFE Aluminium, Copper
and Zinc Inventory Data
US New Home Sales
29 February 2012 33
COMMODITIES RESEARCH ANALYSTS
Barclays Capital
5 The North Colonnade
London E14 4BB
Gayle Berry Suki Cooper Helima Croft Paul Horsnell
Commodities Research Commodities Research Commodities Research Commodities Research
+44 (0)20 3134 1596 +1 212 526 7896 +1 212 526 0764 +44 (0)20 7773 1145
gayle.berry@barcap.com suki.cooper@barcap.com helima.croft@barcap.com paul.horsnell@barcap.com
Miswin Mahesh Roxana Mohammadian-Molina Kevin Norrish Amrita Sen
+44 (0)20 77734291 +44 (0)20 7773 2117 +44 (0)20 7773 0369 +44 (0)20 3134 2266
miswin.mahesh@barcap.com roxana.mohammadian-molina@barcap.com kevin.norrish@barcap.com amrita.sen@barcap.com
Trevor Sikorski Nicholas Snowdon Kate Tang Sudakshina Unnikrishnan
+44 (0)20 3134 0160 +1 212 526 7279 +44 (0)20 7773 0930 +44 (0)20 7773 3797
trevor.sikorski@barcap.com nicholas.snowdon@barcap.com kate.tang@barcap.com sudakshina.unnikrishnan@barcap.com
Shiyang Wang Michael Zenker
Commodities Research Commodities Research
+1 212 526 7464 +1 212 526 2081
shiyang.wang@barcap.com michael.zenker@barcap.com
Commodities Sales
Craig Shapiro Martin Woodhams
Head of Commodities Sales Commodity Structuring
+1 212 412 3845 +44 (0)20 7773 8638
craig.shapiro@barcap.com martin.woodhams@barcap.com
29 February 2012 34
Analyst Certification(s)
We, Suki Cooper, Roxana Mohammadian Molina, Kevin Norrish and Amrita Sen, hereby certify (1) that the views expressed in this research report accurately
reflect our personal views about any or all of the subject securities or issuers referred to in this research report and (2) no part of our compensation was, is or
will be directly or indirectly related to the specific recommendations or views expressed in this research report.
Important Disclosures
For current important disclosures regarding companies that are the subject of this research report, please send a written request to: Barclays Capital Research
Compliance, 745 Seventh Avenue, 17th Floor, New York, NY 10019 or refer to http://publicresearch.barcap.com or call 212-526-1072.
Barclays Capital does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that Barclays Capital
may have a conflict of interest that could affect the objectivity of this report. Any reference to Barclays Capital includes its affiliates. Barclays Capital and/or an
affiliate thereof (the "firm") regularly trades, generally deals as principal and generally provides liquidity (as market maker or otherwise) in the debt securities
that are the subject of this research report (and related derivatives thereof). The firm's proprietary trading accounts may have either a long and / or short
position in such securities and / or derivative instruments, which may pose a conflict with the interests of investing customers. Where permitted and subject
to appropriate information barrier restrictions, the firm's fixed income research analysts regularly interact with its trading desk personnel to determine current
prices of fixed income securities. The firm's fixed income research analyst(s) receive compensation based on various factors including, but not limited to, the
quality of their work, the overall performance of the firm (including the profitability of the investment banking department), the profitability and revenues of
the Fixed Income Division and the outstanding principal amount and trading value of, the profitability of, and the potential interest of the firms investing
clients in research with respect to, the asset class covered by the analyst. To the extent that any historical pricing information was obtained from Barclays
Capital trading desks, the firm makes no representation that it is accurate or complete. All levels, prices and spreads are historical and do not represent
current market levels, prices or spreads, some or all of which may have changed since the publication of this document. Barclays Capital produces a variety of
research products including, but not limited to, fundamental analysis, equity-linked analysis, quantitative analysis, and trade ideas. Recommendations
contained in one type of research product may differ from recommendations contained in other types of research products, whether as a result of differing
time horizons, methodologies, or otherwise. In order to access Barclays Capital's Statement regarding Research Dissemination Policies and Procedures, please
refer to https://live.barcap.com/publiccp/RSR/nyfipubs/disclaimer/disclaimer-research-dissemination.html.
Disclaimer
This publication has been prepared by Barclays Capital, the investment banking division of Barclays Bank PLC, and/or one or more of its affiliates as provided
below. It is provided to our clients for information purposes only, and Barclays Capital makes no express or implied warranties, and expressly disclaims all
warranties of merchantability or fitness for a particular purpose or use with respect to any data included in this publication. Barclays Capital will not treat
unauthorized recipients of this report as its clients. Prices shown are indicative and Barclays Capital is not offering to buy or sell or soliciting offers to buy or
sell any financial instrument. Without limiting any of the foregoing and to the extent permitted by law, in no event shall Barclays Capital, nor any affiliate, nor
any of their respective officers, directors, partners, or employees have any liability for (a) any special, punitive, indirect, or consequential damages; or (b) any
lost profits, lost revenue, loss of anticipated savings or loss of opportunity or other financial loss, even if notified of the possibility of such damages, arising
from any use of this publication or its contents. Other than disclosures relating to Barclays Capital, the information contained in this publication has been
obtained from sources that Barclays Capital believes to be reliable, but Barclays Capital does not represent or warrant that it is accurate or complete. The
views in this publication are those of Barclays Capital and are subject to change, and Barclays Capital has no obligation to update its opinions or the
information in this publication.
The analyst recommendations in this publication reflect solely and exclusively those of the author(s), and such opinions were prepared independently of any
other interests, including those of Barclays Capital and/or its affiliates. This publication does not constitute personal investment advice or take into account
the individual financial circumstances or objectives of the clients who receive it. The securities discussed herein may not be suitable for all investors. Barclays
Capital recommends that investors independently evaluate each issuer, security or instrument discussed herein and consult any independent advisors they
believe necessary. The value of and income from any investment may fluctuate from day to day as a result of changes in relevant economic markets
(including changes in market liquidity). The information herein is not intended to predict actual results, which may differ substantially from those reflected.
Past performance is not necessarily indicative of future results.
This communication is being made available in the UK and Europe primarily to persons who are investment professionals as that term is defined in Article 19
of the Financial Services and Markets Act 2000 (Financial Promotion Order) 2005. It is directed at, and therefore should only be relied upon by, persons who
have professional experience in matters relating to investments. The investments to which it relates are available only to such persons and will be entered into
only with such persons. Barclays Capital is authorized and regulated by the Financial Services Authority ('FSA') and member of the London Stock Exchange.
Barclays Capital Inc., U.S. registered broker/dealer and member of FINRA (www.finra.org), is distributing this material in the United States and, in connection
therewith accepts responsibility for its contents. Any U.S. person wishing to effect a transaction in any security discussed herein should do so only by
contacting a representative of Barclays Capital Inc. in the U.S. at 745 Seventh Avenue, New York, New York 10019. Non-U.S. persons should contact and
execute transactions through a Barclays Bank PLC branch or affiliate in their home jurisdiction unless local regulations permit otherwise. Barclays Bank PLC,
Paris Branch (registered in France under Paris RCS number 381 066 281) is regulated by the Autorité des marchés financiers and the Autorité de contrôle
prudentiel. Registered office 34/36 Avenue de Friedland 75008 Paris. This material is distributed in Canada by Barclays Capital Canada Inc., a registered
investment dealer and member of IIROC (www.iiroc.ca). Subject to the conditions of this publication as set out above, Absa Capital, the Investment Banking
Division of Absa Bank Limited, an authorised financial services provider (Registration No.: 1986/004794/06), is distributing this material in South Africa. Absa
Bank Limited is regulated by the South African Reserve Bank. This publication is not, nor is it intended to be, advice as defined and/or contemplated in the
(South African) Financial Advisory and Intermediary Services Act, 37 of 2002, or any other financial, investment, trading, tax, legal, accounting, retirement,
actuarial or other professional advice or service whatsoever. Any South African person or entity wishing to effect a transaction in any security discussed
herein should do so only by contacting a representative of Absa Capital in South Africa, 15 Alice Lane, Sandton, Johannesburg, Gauteng 2196. Absa Capital is
an affiliate of Barclays Capital. In Japan, foreign exchange research reports are prepared and distributed by Barclays Bank PLC Tokyo Branch. Other research
reports are distributed to institutional investors in Japan by Barclays Capital Japan Limited. Barclays Capital Japan Limited is a joint-stock company
incorporated in Japan with registered office of 6-10-1 Roppongi, Minato-ku, Tokyo 106-6131, Japan. It is a subsidiary of Barclays Bank PLC and a registered
financial instruments firm regulated by the Financial Services Agency of Japan. Registered Number: Kanto Zaimukyokucho (kinsho) No. 143. Barclays Bank
PLC, Hong Kong Branch is distributing this material in Hong Kong as an authorised institution regulated by the Hong Kong Monetary Authority. Registered
Office: 41/F, Cheung Kong Center, 2 Queen's Road Central, Hong Kong. This material is issued in Taiwan by Barclays Capital Securities Taiwan Limited. This
material on securities not traded in Taiwan is not to be construed as 'recommendation' in Taiwan. Barclays Capital Securities Taiwan Limited does not accept
orders from clients to trade in such securities. This material may not be distributed to the public media or used by the public media without prior written
consent of Barclays Capital. This material is distributed in South Korea by Barclays Capital Securities Limited, Seoul Branch. All equity research material is
distributed in India by Barclays Securities (India) Private Limited (SEBI Registration No: INB/INF 231292732 (NSE), INB/INF 011292738 (BSE), Registered
Office: 208 | Ceejay House | Dr. Annie Besant Road | Shivsagar Estate | Worli | Mumbai - 400 018 | India, Phone: + 91 22 67196363). Other research reports are
distributed in India by Barclays Bank PLC, India Branch. Barclays Bank PLC Frankfurt Branch distributes this material in Germany under the supervision of
Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin). This material is distributed in Malaysia by Barclays Capital Markets Malaysia Sdn Bhd. This material is
distributed in Brazil by Banco Barclays S.A. This material is distributed in Mexico by Barclays Bank Mexico, S.A. Barclays Bank PLC in the Dubai International
Financial Centre (Registered No. 0060) is regulated by the Dubai Financial Services Authority (DFSA). Principal place of business in the Dubai International
Financial Centre: The Gate Village, Building 4, Level 4, PO Box 506504, Dubai, United Arab Emirates. Barclays Bank PLC-DIFC Branch, may only undertake the
financial services activities that fall within the scope of its existing DFSA licence. Related financial products or services are only available to Professional
Clients, as defined by the Dubai Financial Services Authority. Barclays Bank PLC in the UAE is regulated by the Central Bank of the UAE and is licensed to
conduct business activities as a branch of a commercial bank incorporated outside the UAE in Dubai (Licence No.: 13/1844/2008, Registered Office: Building
No. 6, Burj Dubai Business Hub, Sheikh Zayed Road, Dubai City) and Abu Dhabi (Licence No.: 13/952/2008, Registered Office: Al Jazira Towers, Hamdan
Street, PO Box 2734, Abu Dhabi). Barclays Bank PLC in the Qatar Financial Centre (Registered No. 00018) is authorised by the Qatar Financial Centre
Regulatory Authority (QFCRA). Barclays Bank PLC-QFC Branch may only undertake the regulated activities that fall within the scope of its existing QFCRA
licence. Principal place of business in Qatar: Qatar Financial Centre, Office 1002, 10th Floor, QFC Tower, Diplomatic Area, West Bay, PO Box 15891, Doha,
Qatar. Related financial products or services are only available to Business Customers as defined by the Qatar Financial Centre Regulatory Authority. This
material is distributed in the UAE (including the Dubai International Financial Centre) and Qatar by Barclays Bank PLC. This material is distributed in Saudi
Arabia by Barclays Saudi Arabia ('BSA'). It is not the intention of the Publication to be used or deemed as recommendation, option or advice for any action (s)
that may take place in future. Barclays Saudi Arabia is a Closed Joint Stock Company, (CMA License No. 09141-37). Registered office Al Faisaliah Tower, Level
18, Riyadh 11311, Kingdom of Saudi Arabia. Authorised and regulated by the Capital Market Authority, Commercial Registration Number: 1010283024. This
material is distributed in Russia by OOO Barclays Capital, affiliated company of Barclays Bank PLC, registered and regulated in Russia by the FSFM. Broker
License #177-11850-100000; Dealer License #177-11855-010000. Registered address in Russia: 125047 Moscow, 1st Tverskaya-Yamskaya str. 21. This
material is distributed in Singapore by the Singapore branch of Barclays Bank PLC, a bank licensed in Singapore by the Monetary Authority of Singapore. For
matters in connection with this report, recipients in Singapore may contact the Singapore branch of Barclays Bank PLC, whose registered address is One
Raffles Quay Level 28, South Tower, Singapore 048583. Barclays Bank PLC, Australia Branch (ARBN 062 449 585, AFSL 246617) is distributing this material
in Australia. It is directed at 'wholesale clients' as defined by Australian Corporations Act 2001.
IRS Circular 230 Prepared Materials Disclaimer: Barclays Capital and its affiliates do not provide tax advice and nothing contained herein should be construed
to be tax advice. Please be advised that any discussion of U.S. tax matters contained herein (including any attachments) (i) is not intended or written to be
used, and cannot be used, by you for the purpose of avoiding U.S. tax-related penalties; and (ii) was written to support the promotion or marketing of the
transactions or other matters addressed herein. Accordingly, you should seek advice based on your particular circumstances from an independent tax
advisor.
Barclays Capital is not responsible for, and makes no warranties whatsoever as to, the content of any third-party web site accessed via a hyperlink in this
publication and such information is not incorporated by reference.
© Copyright Barclays Bank PLC (2012). All rights reserved. No part of this publication may be reproduced in any manner without the prior written permission
of Barclays Capital or any of its affiliates. Barclays Bank PLC is registered in England No. 1026167. Registered office 1 Churchill Place, London, E14 5HP.
Additional information regarding this publication will be furnished upon request.
EU18246
EU17637

The Commodity Investor - Testing The Ground

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

The Commodity Investor - Testing The Ground

Uploaded by

Copyright:

Available Formats

COMMODITIES RESEARCH 29 February 2012

Figure 1: January saw a $3.7bn inflow into commodities

15 Monthly inflows into commodities

Commodity investing to rebound in 2012

100 Barclays Capital estimates of Inflows into commodities ($bn)

80 Commodity medium term notes issuance

Source: Barclays Capital

Investor appetite for commodities is expected to rebound in 2012

 A combined 77% cite portfolio diversification or absolute returns as the main

After cutting commodity exposure in 2011, investors are still light

Source: Barclays Capital Source: Barclays Capital

Source: Barclays Capital

2012 looks like being a stronger year for investment flows

40% 2012 2011 50%

Source: Barclays Capital Source: Barclays Capital

Investors still value commodities for diversification and returns

Source: Barclays Capital Source: Barclays Capital

Direct exposure to commodities is what investors want

Source: Barclays Capital Source: Barclays Capital

0% 5% 10% 15% 20% 25% 0% 10% 20% 30%

Source: Barclays Capital Source: Barclays Capital

And how did they do last year?

Which commodity will perform best in 2011? Commodity performance in 2011

-30 -20 -10 0 10 20 30 -80% -60% -40% -20% 0% 20%

Commodity survey results

Monthly trends in commodity investment flows

The bounce-back in sentiment was also reflected in a positive allocation from US

Source: Bloomberg, Barclays Capital Source: Bloomberg, Barclays Capital

Source: MTN-I, Barclays Capital Source: MTN-I, Barclays Capital

TOTAL COMMODITY ASSETS UNDER MANAGEMENT

Figure 28: Total commodity AUM

Figure 29: Estimate of index AUM

Figure 30: Exchange-traded products (ETP) AUM

Figure 31: Medium-term notes (MTN) AUM

TOTAL COMMODITY INVESTMENT FLOWS

Figure 32: Total commodity flows

Figure 33: Estimate of index flows

Figure 34: Exchange-traded products (ETP) flows

Figure 35: Medium term notes (MTN) flows

CFTC DATA: POSITIONS BY MARKET

Figure 42: Commitments of traders – managed money overview

Source: CFTC, Barclays Capital Source: CFTC, Barclays Capital

Figure 45: Commitments of traders – swap dealer overview

-500 5000 12%

-1000 4000 10%

Source: CFTC, Barclays Capital Source: CFTC, Barclays Capital

We are opening a several new trades this month.

 The long-running push to reconfigure refineries globally to maximise the production of

 We expect only sluggish consumption growth in 2011-12 at 1.3% (compared with an

Figure 48: Key recommendations

Figure 49: Recent trade history

COMMODITY INVESTMENT PERFORMANCE

(Un)expected strong start

1% Roll yield S&PGSCI Selected commodity strategy returns

0% Value (long only)

-4% Value (long/short)

-5% Liquidity (DJ-UBS)

Source: Ecowin, Barclays Capital Source: Ecowin, Barclays Capital

We expect the performance of curve risk premia strategies to be mixed, with

Figure 52: Benchmark indices for selected asset classes

Jan-12 Q4 11 Q3 11 Q2 11 YTD '12 2011 Last 5 years Start of data

Figure 53: Commodity sub-indices

A combined 77% cite portfolio diversification or absolute returns as the main

The long-running push to reconfigure refineries globally to maximise the production of

We expect only sluggish consumption growth in 2011-12 at 1.3% (compared with an