Avoid Financial Stress

Commodities Market

Aluminum: Aluminum has been in the buzz since few weeks due to US Sanctions on Rusal. Surrounded by several market news aluminum seems to be the most volatile and interesting commodity for the next 15 days’ period. The LME also delisted it due to which there was scarcity of aluminum. The US sanctions on Rusal (Russian Aluminum producer, 2nd largest in the world) caused a spike in the aluminum prices, which skyrocketed till $2700, have somewhat stabilized to the range of $ 2200 to 2300.

It is seen that due to pressure from European leaders, US has agreed to remove sanctions on Rusal if Oleg Deripaska agrees to reduce his stake in Rusal by October 23rd which could be less than 50% or 0%. Oleg Deripaska has significantly reduced his stake and due to that the US has agreed to remove sanctions, due to that aluminum is slowly returning to normal levels which are now at $2225/ton.

In coming time due to further agreeing of demands of US, the metal will see further softening of rates and may see further downslide of 5-10%, and settling at $2000-$2100 where it started from. So after a roller coaster ride for the metal and commodity market, it is seen that in all probability the Russian business man and his company shall agree to the conditions of US government and there would be stability for the metal prices in the coming period. “In my opinion Oleg will have to do whatever the US Govt. says to remove the sanctions completely and within a span of 1 month, you will again see levels of aluminum go back to its original cost $2000-$2100 per ton because European leaders doesn’t want the sanction and Oleg has also realized that if he doesn’t relinquish his share holdings as per US Govt. so there will be negotiations happening between him and US Govt. This is market commentary of aluminum from 6th April till date. The future predictions depend upon the decisions that Oleg and US govt. takes.

Nickel: Nickel prices also hit the roof from $ 13500 to $ 16500 in two days, this was due to the fact that Nornickel is also a Russian producer and the market anticipated similar ban from US government which can also be faced by Nornickel, thus affecting the nickel prices. But after the relief of sanctions on Rusal the nickel prices also fell and there is no fear of any sanctions on the nickel and the prices should further see a slight downtrend from the current market levels, expecting a level of $ 13800

Copper: Copper shows sideways movement, no real trending momentum, fundamentals do not suggest upward movement; the prices should remain on softer side. There isn’t any such trigger on any wave movement. There isn’t much happening on other base metal like zinc and Lead.

Gold & Silver: Due to relaxations in tensions gold and silver prices have seen a downward trend in the last couple of weeks. Gold and silver have an inverse ratio to tensions. North Korea and South Korea have begun talks and agreed to de-nuclearize its nuclear tests. Fundamentally I still believe is that gold is always “buy” at dips and investment for long term. It’s a good time to invest in gold. It can be enchased when there is turmoil in the equities market and tensions in world politics and economies.

Silver: Silver has underperformed from sometime, in comparison to gold. Logically interpreting the conditions, it feels that there is some lobbying or speculative interest that is trying to put it down. So it is advisable to stay away from silver and not Punt on silver at the current time and levels.

Metal Market Scenario: I see other metals at downward bias apart from gold.

Crude Oil: It is very Geo Politically driven, see no big price trends, will remain range bound between $65 to $75 for sometimes. As far as Indian market is concerned one has to be very cautious because the crude oil prices have been rising and Brent Crude Oil is trading about $ 70 per barrel and they have risen. So, that creates an impact on India’s import bill which ultimately impacts its economy. Moreover, election is approaching near and we don’t know which party will win which is another uncertainty next year.

Equity Markets: Valuations of the equity market are bit too stretched, rallying only because of liquidity from institutions and mutual funds. So an Investor needs to be cautious and careful because if you see the last 2 weeks trading in currency market USD v/s INR. INR has depreciated quite a bit against USD. Either the currency has to appreciate or the equity has to come down. So, Markets can fall if liquidity dries or if there are any negative news.

It is time to encash on your profits and sit on cash for some time and wait for better market opportunities and situations. If you are an investor and would like to invest in buy position, the buy position should be protected by Put Position.

Sometimes doing nothing and waiting and sitting on cash can be the best strategy as you avoid potential losses.