Early October was a period when most commodities prices fell on account of swelling inventories due to US partial government shutdown. US being world’s largest consumer of crude oil, any economic concerns of the country have a dominos effect on Crude Oil prices around the globe. Towards mid- October US’s debt ceiling issue was resolved temporarily by the Congress. Coupled with this factor, the improved economic growth data from China rendered support to falling Crude Oil prices. The re-opening of US government had a positive effect on falling crude prices, however the industrial metal prices slipped from a two week high as investors were cautious about the delayed US data. The prices of industrial metals like Copper, Nickel and Tin have decreased with investors moving away from owing to lack of clarity in US debt ceiling issue. These prices are further expected to go down as the rising home prices of China, may raise the concerns for the People Bank of China to resort to measures to curb inflation by increasing interest rates.
Commodity prices trend in emerging economies like India is a little different than its neighbor China. Rupee has found support after RBI took measures to strengthen its values against the US Dollar. But the currency is still struggling and adding pressure on CAD. Any global impact on base metals and dollar denominated commodities has a negative effect on the economic data of the country. October was mixed bag for the base metals complex in India with Aluminum prices rising and Copper prices going down.
Commodities have not performed well in comparison to other assets this year. The weakness in metals has spread to energy segment with prices remaining subdued for most part of the year. The rebound of commodity returns for investors depends on China’s Communist Party’s Plenum slated in second week of November where crucial reforms are announced.
Written By Arthayantra