Commodities trended weak for the second consecutive week as the market undermined the threats related to the Russia-Ukraine War. Along with this, factors like increase in cases of corona virus in China, sell-off in equity market and announcement of Fed’s much-awaited red hike also affected the commodities. Ravindra V Rao, Head (Commodity Research), Kotak Securities, said this in a column written for Moneycontrol.
Metals fall led by aluminum
“Gold slipped below $1,900 an ounce on safe-haven buying and lower hedge demand against inflation on tighter Fed estimates,” Rao said. Crude oil hit a two-week low. Industrial metals, led by aluminum, are on a downtrend amid falling energy prices and easing concerns about the Chinese economy.
Russia-Ukraine tension eases, but no signs of reconciliation
However, at the beginning of this month, there has been a big rally in commodities. However, prices appear to be softening on signs of easing tensions between Russia and Ukraine. However, if there is no reconciliation between the two, the confidence of the market may be weakened. The fight has entered the fourth week and is getting bigger. The comments of Western countries also do not show confidence. The US president has labeled the Russian president a war criminal, while France has warned that Russia is just pretending to be a negotiator.
Economic activity has been impacted by rising Covid cases and Chinese tech stocks continue to fall amid concerns of delisting on US exchanges for not complying with accounting standards. The market has been disappointed with China’s central bank not making any change in key policy rates.
The Fed raised its key lending rate by 0.25 percent for the first time since the start of the pandemic. The Fed’s projections indicate the possibility of another six rate hikes this year.
Will still fluctuate
For the Russo-Ukraine war, we are currently in the mood to “wait” until something concrete is reached on the issue of a solution. However, if a solution is not found soon, then the concerns related to the supply may deepen again. Concerns related to China may remain until the virus situation improves or concerted efforts are made to stimulate growth.
The Fed has a tough stance, but US economic data and decisions by other central banks could affect market expectations. With so many uncertainties, there will be ups and downs for now.
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