AHMEDABAD: Worsening global economic scenario will ensure that the commodity market continues to correct. Globally, surging crude prices have led to an inflationary situation thus affecting global commodity consumption. Hence, a sluggish market.
Market experts believe that the sluggishness in the commodity market will continue till prices return to their reasonable levels. An analysis of the commodity prices in the last few weeks shows that prices have fallen in double digits in percentage terms. Commodities like crude, base metals and agricultural products have seen corrections.
Taking a close look at the prices on August 1, the prices reduced by 27% for nickel, maize (26%), zinc (23%), crude palm oil (20%), soyabean (17%), crude (15%), aluminum(13%), copper (12%), silver (10%) and gold (9%).
In the last two years, commodities like base metals saw volatility in price movements, both upward as well as downward. But commodities like crude, bullion and agri products have gradually moved northward. Since one month, the prices of other commodities started moving downward in the footsteps of crude.
“Crude is one of the major reasons behind the current correction status in the commodity market”, said Hitesh Somani, research analyst, Kunvarji Commodities. He believes the market can expect further fall in prices, if crude prices continue southward.
Commodities like soyabean, CPO and maize are correlated with crude prices, thus fall in crude prices affect these commodities as well. “It is expected that crude prices might touch $110 per barrel”, adds Mr Somani.
However, some analysts believe that along with the fall in commodity prices, consolidation in the market has begun.
Geojit Financial Services commodity head C P Krishnan told ET, “Slowdown in the global economy won’t absorb higher prices”. He added that there is still scope for a further fall as commodity prices are hovering at higher level.
“High crude prices and inflationary situation are hurting the global economy that has severely affected demand. Many of hedge funds managers have already liquidated their position and booked profits at higher levels,” he said.(ET)
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