Commodities overview Commodities - Key points Preferences (6 months) e Broadly diversified commodity indices, which declined by about 10% in May, found some support in erieerwels eu, SMerwelae June. The sideways move was visible across all commodity sectors, with gold (precious metals) Commodities delivering a temporary price uptick after the May US nonfarm payroll release. total e Despite signs of price stabilization, diversified commodity indices are likely to decline in the precios coming weeks. Sluggish economic activity should put upward pressure on most commodity Metals inventories. To mitigate inventory buildups, lower prices are required, in our view. Production cuts for cyclical commodities need to be incentivized, while demand needs a push. Energy e The starting point for gold (precious metals) remains challenging, with supply likely to outpace demand this year. However, the chance of further monetary easing (QE3) by the Fed - which is not our fave Biefals base case - is an upside risk to the gold price. Given the weak fundamental situation combined with the substantial QE3 risk we maintain our neutral position. e Easing geopolitical tensions related to Iran and further inventory builds in crude oil shifted the Agricultural market's attention to sluggish demand growth. With muted incremental crude oil consumption, crude oil prices are likely to remain under pressure. But as production cuts are likely to kick in, downward Bnew pe price momentum should slow meaningfully. OPEC production cuts of up to 0.5 mbpd are needed in Source: UBS CIO, as of 22 June 2012 the coming months, and should allow the Brent price to stabilize in the USD 80.5 - 90/bbl range (WTI Note: Past performance is not an indication of future returns. with a USD 12/bbl discount). But a sideways move in crude oil is not good enough to be long the commodity. The Brent forward curve has joined WTI and moved into contango as well. Hence, we keep our underweight position. e With regards to base