As we march into the year 2022, leaving behind a volatile and eventful 12 months for the commodity markets, we witnessed the Base Metals and Energy commodities stealing the show with jaw-dropping returns.

COMMERCIAL BREAK
SCROLL TO CONTINUE READING

While precious metals registered negative to flat returns, the question on everyone’s mind is how the commodity markets are going to behave in the year 2022.

See Zee Business Live TV Streaming Below:

Pritam Patnaik, Head - Commodities, HNI and NRI Acquisition, Axis Securities decodes how different commodities are likely to move in 2022:

Going forward, the commodity markets will be impacted by developments relating to the Coronavirus, proposed rate hikes and central bank’s policy action, supply chain dynamics, the Chinese government’s economic lifeline, and the ability to contain the property glut.

On the back of a rather tepid year for Gold, which delivered a -4% negative return, thanks to a buoyant equity market - a strong dollar index, the tapering of the bond purchase program, and higher interest rate prospects -- Gold struggled to deliver positive returns, despite the supportive Corona crisis and higher inflation rates.

In the coming year, the prospects don’t look too attractive in Q1, given the proposed 3 rate hikes indicated by the Fed, which other central banks are sure to follow suit.

That said, we could see some positive moves in Gold in Q2 of 2022. The US Fed’s rate hikes are already priced-in, and any new fear or crisis will help Gold prices.

While the initial reaction of a rate hike is always negative for Gold, once processed, it could trigger a rally. Historically, Gold tends to deliver positive returns once the Fed commences a rate hike cycle.

A stubborn inflationary cycle will only aid the up move. One could look at buying Gold around 46,500-46,000, with a target price of 49500.

Last year, Silver performed worse compared to Gold, registering a negative return of -7.7%. That said, Silver could follow a suite of Gold’s price trajectory and register positive returns in the coming year.

The Gold to silver ratio is at 80:1, which makes the commodity look relatively cheaper. Silver too could be bought on dips below 62,500 for a target of 65,500.

2022 will be the year for Crude. Despite delivering close to 53% return in the current year, crude still has some steam left which could propel it towards the $100 mark.

A full demand recovery and limited supply will help prices. Supply is improving but still short of the required quota. WTI Crude is likely to hover between a range of 65 and 90 dollars.

Here are the four major factors that could be determining the factors in the outlook for the oil market in 2022:

a) Possibility of demand destruction due to Covid Variants
b) Continued inflationary trend
c) OPEC+ group actions
d) Escalating Geopolitical tensions in oil-sensitive regions.

One could look at buying on dips around Rs. 5200, with a target price of Rs. 6850. Higher supplies are expected to cool copper prices next year.

Long-term prospects for Copper remain bullish, but the market looks set to be on pause next year compared to this year metal’s central role in the energy transition will keep sentiment positive.

Fears of China’s property slowdown as overblown, gains from EVs, renewable and electrical network investment outweigh the policy-moderated drag from property and machinery.

Mine supply will be supplemented by scrap, which typically accounts for about one-third of global refined metal supplies, keeping prices subdued. The overall trend is to buy on dips for copper, a breakdown below 740 may push prices lower towards 730, which is a good level to enter Copper for the target of 750/790 /800

(Disclaimer: The views/suggestions/advices expressed here in this article is solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)