The only words that can accurately describe the moves over the past week in commodities like, WTI Crude and Gold, is ‘extremely bullish’. I have been bearish on metals and energy, and although I am not hugely convinced that the current rally is sustainable, it is very hard to argue with the week on week numbers and facts, with a rise in prices by 3% in Gold and 6.50% in WTI Crude.

It is to say the least that the market is driven by sentiment, because the market is not supportive of a continuous rally. The IMF has just revised world GDP growth down from -0.5% to -1%, against a market consensus which approaches -1.5%, which should leave the demand side elements to commodities lagging seriously behind. However, to some extent the move by OPEC not to cut left the market believing that indeed all is fine and that there was no need to cut. Hence, the rally!

And although the are some serious concerns about non-OPEC supplies diminishing intact with the lack of capital investment and improvements to developing nations, we have yet to see the full impact of it. In other words, when the Russian government revises its production levels lower, it will be hard to quantify the exact influence this will have on prices, taken into consideration that consumption will fall in line with global growth.

With Crude Oil stock up 45% from this time last year, I will find it especially hard to be bullish for any length of time. But standing in the face of the current bullish sentiment, the risk to reward ratio is simply not supportive of any shorts.

I will resist any shorts for next week, and take a small bias to the long side. The current move has a sufficient build in momentum and could set up for a move towards the $59.50 level. If long take profit at this level and begin to look for an opportunity for shorts from there. However, a sustained break below $48.50 puts us back in bearish territory again. So keep very good discipline on long positions.

As for the Gold markets, we have moved from the very bearish back into middle ground. The rally on Wednesday in Gold after the FOMC meeting cannot be ignored and appears to have squeezed many shorts out of the market. That being said, I will remain on the fence with precious metals, after the move into neutral ground, or at least until the deterioration of the US dollar stops.