Major policy changes will impact commodities mkt

4 Factors

• Geopolitics
• Polls in 78 countries this year
• Possible rate cuts
• Ongoing global slowdown

Chennai: During 2024 the commodities sector will revolve around four major themes -- slowing global growth, interest rate cuts, geopolitical conflicts and general elections in major economies, said Naveen Mathur, director (commodities & currencies), Anand Rathi Shares and Stock Brokers.

He said this year will see 78 elections across the world, over half of which will choose a new President which will likely bring changes in the monetary policies of major economies, keeping inflation down.

Looking back at 2023, Mathur said, it was a year of disappointment for most traded commodities with the exception of precious metals and a few other metal commodities such as iron ore witnessing a recovery in the latter half of the year. In an interview with IANS, Mathur looks at the head and tailwinds for the commodities sector in 2024 as well as looking back at 2023. Responding to a question on the tailwinds to drive the commodities sector in 2024, Mathur said: “Slowing global growth amid interest rate cuts could augment the safe haven appeal of gold where fresh new highs could be witnessed in 2024. Silver on the other hand could also deliver positive returns amid investment demand to remain robust due to cooling global growth which could offset slowdown in physical demand elsewhere.”

Despite global slowdown fears, value in the base metals such as copper remains intact in the light of the long-term structural trends. They may be the key players in the green revolution that will involve all sectors of our society.

There is indeed a huge need for raw materials to be met; technologies such as wind, solar, electric vehicles but also the nuclear sector, require a large amount of input. The year 2024 could revolve around four key themes: slowing global growth, interest rate cuts, geopolitical conflicts, general elections in major economies.

In addition, the heightened geopolitical environment will likely persist through 2024 where 78 elections are scheduled across the world, over half of which will choose a new president. Such a concentration of political risk into one single year is certainly historic and could bring about the necessary changes in the monetary policies of the major economies keeping inflation subdued.

Demand scenarios particularly in base metals and energy commodities could remain impacted by the slowdown in the developed economies in the second half of the year such as the US and China.

New mining investments could also remain impacted by higher interest rates and global slowdown fears. Meanwhile, constrained supply could be offset by demand concerns from leading consumers such as China. On the other hand, a weaker dollar could limit a sharp downside leading to a subdued trend for most base metal commodities. In terms of precious metals demand, overall gold investment may grow modestly in 2024, but physical investment in bars and coins might soften as higher prices start to bite demand for retail investors who look for hedges against inflation as signs of cooling appear.

Demand and supply trends in 2024

Supply could remain constrained in terms of new mining investments as interest rates could remain at higher levels in the first half of next year. Global demand slowdown concerns could also emerge amid cooling economic conditions.

Hence, expectations remain of a further decline in metal prices from 2023 levels on slowing demand offsetting constrained supply before it stabilises in 2025 as demand recovers.