Some factors are working in support of the commodity. The outlook for Bullion and Agri Commodity is looking strong in the coming days.
Investment Strategy in Commodity: The selling pressure in the stock market has been there since the beginning of this year. Factors like inflation, rate hike cycle, geopolitical tension, high crude prices, supply chain disruptions, rise in bond yields, weakness in rupee are weakening the stock market. Experts believe that whatever negative factors are there for equities, they do not seem to end suddenly. In such a situation, there will be a correction in the market in the near term also. In such a situation, some of the loss in equity can be compensated by the commodity market. Are there better investment opportunities in Bullion or Agri Commodity? Know what commodity experts have to say about this.
Commodity performance this year against equities
Dow Jones: -13.61%
MCX Gold: +7.19%
MCX SILVER: -2.15%
MCX Crude oil: +65.17%
NCDEX Guar Seed: -3.73%
MCX Cotton: +37.57%
NCDEX Cumin: +31.74%
Why is the commodity getting support?
Ajay Kedia, Director, Kedia Commodity says that the selling pressure on equities will continue in the near term. On the other hand some factors are working in support of the commodity. The outlook for Bullion and Agri Commodity is looking strong in the coming days. They say that post-Pandemic, sudden pick-up in demand, geo-political tensions, unfavorable weather conditions around the world, inflation, problems in logistics services, reduced production and supply disruptions are supporting commodity prices.
He says that the way the major producing countries of agri commodity are currently focused on increasing imports and reducing or stopping exports, it is clear that there is more demand than supply. On the other hand, if we look at the weather conditions around the world, then it is going to support the commodity. For example, there has been a drought situation in the US, which will affect seasonal production. At the same time, due to the war between Russia and Ukraine, both production and supply of some agri commodities have been affected.
Wheat, cotton, barley, oil seeds will accelerate
According to Kedia, Ukraine is called the wheat bowl. Apart from this, Ukraine is a major producer of many agri commodities. Talking about this season, there is sleeping season from March to May, which has been affected by the war. Sowing has fallen by more than 50 per cent this year, which will reduce production by half on an annual basis. Its effect will be visible on the prices of agri commodity after 6 months. In such a situation, wheat, cotton, barley and oil seeds may increase further in the coming days.
bullion will accelerate
Anuj Gupta, VP-Research, IIFL, says that in the current times when there is a loss in equities, risk remains in the bond market, safe haven demand for bullion may increase. Both gold and silver are showing better returns ahead. Anyway, this year there has been a positive return in gold. It will be supported by factors like inflation, volatility in equities, fear of recession. Although there is some pressure from the interest rate hike, but in the near term, there is a rally in gold and silver. They say that enter between 49 thousand to 50 thousand in gold and make a target of 52 thousand and then 53 thousand for the next 3 months. On the other hand, enter between 59 thousand to 60 thousand in silver and keep a target of 65 thousand and then 68 thousand for 3 months.