Positive economic news, particularly from China, continued to fuel a commodity price revival last week.

Our long held view of sustained robust growth for the Chinese economy remains in place and should continue to favour more industrially-linked metals and energy. Alongside tighter supply conditions for a range of mined commodities, the surprisingly soft US Dollar added to the bullish momentum, despite rising expectations that the Fed will begin tapering its stimulus program.

Even precious metals joined the rally, as some investors remain cautious that a rapid stimulus removal could derail the economic recovery and the broad bull run for equity markets in 2013. Any Fed tapering will be dependent on continued strong data, and will likely be modest to begin with. The Fed needs the US economy to be at a self-sustaining point, something that appears to be still some way off. While buoyant economic activity for China and the US are positive for commodity demand, concern about Eurozone growth lingers despite some recent signs of growth.

ETFS Physical Silver (PHAG) sees the largest inflows on record, totalling US$145mn as economic recovery picks up. Better than expected Chinese industrial production numbers last week likely prompted investors to switch from gold to silver, as the latter tends to benefit in high growth environments. Over 50% of silver demand comes from the industrial sector vs. 10% for gold.