Copper should rise more strongly than many other commodities if the US economy and global business confidence continue to grow and top metals importer China shows more proof of being headed for a soft economic landing, BarCap said.
"At present, our favored exposures in commodity markets include directional longs in copper and soybeans at the front end of their respective price curves," the research unit of
London's Barclays Group said in its Global Outlook report issued in New York.
Barclays made heavy bets in copper and aluminum that went wrong in 2011 when metals markets lurched lower after hitting record highs earlier in the year.
The spot price of gold, which tracks trades in bullion, fell to a two-month low below $1,630 an ounce on Thursday, unwinding all of the premium built up on expectations of huge US economic stimulus in the near term.
After January's gain of more than 11 percent, bullion has fallen steadily in the past seven weeks. Losses accelerated after the US Federal Reserve gave little sign of approving a third round of quantitative easing amid stronger US economic data.
Weak US inflationary data has also undermined investor confidence in gold as a hedge.
BarCap, however, said it expected precious metals to be one of the commodity price leaders in the second quarter, citing the "resumption of the kind of currency debasement/inflation
concerns that have been the big driver of gold and silver prices over the past 12 months".
It recommended that investors take a long position in December 2012 palladium, saying lower Russian exports should push the market into a supply deficit and bring prices "significantly above current levels" by later this year.
BarCap put a second-quarter price of $745 per ounce for palladium futures on the London Metal Exchange, versus the past four weeks' average of $701. Spot palladium on the LME hit a session bottom below $645 on Thursday.
In base metals, BarCap forecast benchmark London copper futures to trade at $9,000 a tonne in the second quarter, above the $8,457 averaged over the past four weeks.
London copper is up 9 percent on the year, having hit a four-month high of nearly $8,680 in January before slipping below $8,300 lately.
BarCap expects energy markets to consolidate, although it said supply threats related to Iran should keep oil prices fairly well supported.
"We also recommend a long position in far forward oil futures (the December 2015 Brent crude contract) as a long-term buy-and-hold strategy," it said in the report.
Agricultural markets are expected to undergo a broad easing in prices, BarCap said, although it added that significant risks remained in place for the arrival of new crop supplies that would replace tight inventories of old grain.
