The commodity market is a complex and dynamic market that has the potential to influence economies around the world. Commodities can be broadly defined as any raw material or primary product used to produce other goods or services. While this definition may seem broad, several types of commodities play an important role in our economy – including food, energy, metals, and minerals such as crude oil (also known as petroleum), iron ore, and coal.

COMMODITY MARKET

The commodity market refers to any market where investors buy and sell goods that have value. Commodities are traded under a contract between two parties who agree on a price at which they will trade their goods. These contracts can be bought and sold through an exchange such as MCX, NSE, or BSE.

POST-COVID IMPACT ON COMMODITIES

The commodities market can be volatile, and the supply of raw materials has increased. This means that prices are likely to remain low for the next few months. Prices may rise in the coming years as demand grows, but this will depend on how much governments intervene to support their economies.

The post-COVID impact on commodities is complex because there are many factors at play:

∙ Supply vs Demand – how much we use as consumers versus what we produce ourselves (and import).
∙ Government policies on taxes or subsidies towards certain types of production processes or raw materials affect prices directly; e.g., if you cut taxes on some commodity then it becomes more attractive than others; if you subsidize something then people will buy more because they know they’ll pay less when they do so (or vice versa)

COMMODITIES PRICES IN 2022

The price of commodities has been on a steady incline since 2016. Prices have been on the rise steadily, and commodities prices are expected to keep the momentum for the next few years.

For example, aluminum prices globally are at an almost eight-year high. The same case with some of the other commodities like metals. Some of these stocks have already run up and hence fresh entry can only be suggested for short-term traders. For investors, any sharp cool-off or correction could be a good entry opportunity. Nonetheless, for the year 2022, commodities as a sector would continue to remain in momentum.

FACTORS THAT AFFECT COMMODITIES

∙ The global economy: These effects can be felt through relationships maintained between countries. i.e Oil prices increased after the US sanctioned Russia.

∙ The Indian economy: Domestic scenarios affect the prices of commodities. They can be geographical or political.

∙ Weather conditions: Harsh weather conditions such as flooding and drought can damage crops which increases the prices of wheat and crops due to growth in demand.

∙ Demand and Supply: When the demand is high for a commodity and the supply is low, the price of the commodity increases and vice versa.

∙ Tax rates: If taxes are cut on some commodities, then it becomes a money-saving aspect for traders. This way people buy more because they are paying less and saving money at the same time.

SHORT-TERM TECHNICAL OUTLOOK

In the short term, commodities are expected to be in a bull market. This means that prices will go up over some time (typically between three and six months).

In the medium term, commodities are expected to be in an upbeat market with no clear direction or trend. It’s important to remember that this doesn’t mean there won’t be any changes; it just means that there isn’t anything particularly strong driving these prices right now and we’re looking at them more as part of an overall picture rather than something specific happening now or tomorrow.

LONG-TERM TECHNICAL OUTLOOK

A number of commodities will enjoy strong demand growth on a 20-year horizon. These commodities are nickel, aluminium, lithium, cobalt, tin, rare earth, metal scrap, and green steel.

Commodities are expected to be in a bull market in the long term. These are a few reasons for this:

First is the green and digital transactions being accelerated in the coming years. They will support demand for a number of commodities including copper, nickel, cobalt, and lithium for green transitions to make electric car batteries. Commodities such as tin and nickel will rise with demand for digital transitions.

Extensive research and development to improve the efficiency, cost, and sustainability of batteries will lead to fast-moving developments in the types of battery chemicals, leaving some materials at risk of a fall in demand.

OVERVIEW OF COMMODITIES IN 2022

Trading in commodities began primarily as a hedge against inflation. Commodities were mainly created for hedging to reduce risk against inflation. The commodity market is one of the most important markets in the world. It is also considered one of the most volatile markets which fluctuate in price trend daily due to various reasons like supply and demand situation, availability of resources, etc. In India, commodities are considered building blocks of our economy as they help us meet all our daily needs such as food grains, rice, or any other commodity needed by people at home or abroad.

The following section outlines some major trends expected by experts in 2022:

∙ The demand for commodities will keep growing as the population of India is expected to reach 1.4 billion by 2022.

∙ The demand for food grains will be on the rise due to increasing urbanization and changing diets of people.

WHAT TO LOOK FORWARD TO?

As you can see, there are a lot of opportunities for commodities in India. But what do investors need to keep in mind? First and foremost, it’s important to understand that any investment in commodities is highly speculative and carries significant risk. If you’re interested in investing in this area, make sure your knowledge about the market is up-to-date so that you can make informed decisions about whether or not it’s the right time for you to buy into this space.

CONCLUSION

Commodities are headed higher and higher. This is a trend that will continue to play out over the next few years as investors look for ways to make money through commodities. Many people believe that gold is one of the best investments available today, but there are many other commodities worth investing in as well.

If you are thinking of opening a commodity trading account in India, then Goodwill is the place for you. Open a commodity trading account in India with the lowest brokerage charges in less than 10 minutes. What are you waiting for? Contact us today and one of our executives will get in touch with you shortly.