Indian commodities market saw a mixed financial year in 2018. Crude oil had everyone’s attention and it soared wildly high. As the year came close to its last leg, oil went tumbling down. On a year on year (YOY) chart, it dipped almost 18%. In metals segments, all the metals dipped almost two digits except for the yellow metal. Gold held onto its trend owing to having a reputation of being a lucrative investment option and a soaring rupee. In agriculture commodities segment, some of the commodities saw an exceptional year, while some of them tumbled heavily.
Commodities are always vulnerable to external factors, more so in light of the global geopolitical trend and trade war rumors. Supply and production, protectionism, currency movement, the balance of payments, bond yields, and many other factors dictate commodity prices in the global market. Because of all the external factors, the demand fluctuated and it got reflected in the price of commodities.
The year 2019 has begun on a promising note, but the journey ahead is not going to be smooth. India has general elections in 2019, and at the end of the year, U.S will be gearing up for elections. US and China are at loggerheads over tread and tariff wars seem to grow every another day. Investors need to be cautious and pick wise choices. In view of this Shyam Advisory has brought to you Top metal tips and crude oil tips which can help you gain multifold. The MCX Tips are with a view of an investment for a year. Our commodity tips are forwarded to you after having a sound technical and financial analysis. Here are our top five MCX Tips
1. Buy Crude Oil: Target 4400: The oil production has gone down after the Organization of the Petroleum Exporting Countries (OPEC) countries agreed to cut down their production, amidst falling crude oil. The decision taken in December 2018 came in effect from January 1, 2019. “The OPEC+ production cuts (that started this month) will be paramount to keeping the market tight and supporting prices,” ANZ said in a research note.
The report also stated that its oil output fell by 751,000 barrels per day (BPD) in December to 31.58 million BPD, the biggest month-on-month drop in almost two years.
OPEC is making cuts along with other major producers such as Russia. Recent numbers released by the organization shows that crude oil production fell sharply over last month, easing fears about prolonged oversupply. As the production of the oil will dip further, the demand-supply balance will swindle in favor of increasing demand. As the invisible hand of market balances mismatch, the rates will be ticking upwards. Based on this analysis our crude oil tip is to remain a buyer of this commodity.
2. Sell Copper, Target 380, CMP 428. Copper is generally considered to be a slow metal. Rising or falling at a slow pace. There are several factors, which govern the copper’s price namely Mining, Inflation, Industrial Demand, and European Market Movement. Here is an analysis of these 4 factors, which drive the commodity price.
a. Mining Outlook: The copper production was down by 2% in 2017. No major supply disruptions have 2018 and most labor negotiations were agreed. However, overall growth has been negatively affected by lower output at some mines in Canada and operational problems in China, Peru, and the United States. In 2019, there appears to be no major change in production, in all forecasts.
b. Inflation Outlook: Copper might not rise because of supply changes in its physical market but it can certainly move if there is strong inflation. However, the recent Indian economy has shown drastic falls in inflation levels. This again is not a very healthy sign for copper. If the inflation level changes, the prices of copper can go in the opposite direction of this forecast.
c. Euro Movement: Euro has been trading horizontally without showing much volatility, appearing to have found a base. If the euro breaks its current support levels, the price of the copper will fall.
In light of these prevailing factors, our commodity tip for copper is to sell it on a rise. The metal can taste 380 levels in 2019.
3. Buy Nickel, Target -940, CMP 832: Most metals were bled heavily in 2018. Nickel was as hard hit as other base metals in 2018 as investor sentiment bled the markets, leading to lower prices even as demand increased. But the battery metal won’t fade away just like that. Nickel miner Horizonte Minerals reportedly admitted that nickel prices have risen on 2017’s momentum and fallen on 2018’s drama, but the metal is still a solid investment. There are two driving factors for our positive outlook on the metal:
a. It is heavily used in stainless steel production. It will continue to be the primary first use for the nickel for a long time to come.
b. There is an increasing demand for Electrical Vehicles and in return for batteries. Major and junior mining companies are scrambling to bring production online to meet an anticipated peak. Dozens of companies in Australia and other countries are developing projects related to battery technology.
Nickel fell in 2018, mostly because of political turmoil and not because of any drastic change in its fundamentals. Therefore the overriding nickel fundamentals with demand increasing and limited supply coming online should continue pushing the nickel price upward over the medium to long term. The fundamentals compel us to remain positive in our nickel commodity tip.
4. Buy Silver, Target 41000, CMP 39202: Many investors were largely hopeful for silver in 2018. Instead, it turned out to be the precious metal sector’s biggest disappointment.
However, despite the bleeding last year, there is still some optimism in the marketplace that silver could see a reversal of fortunes and outperform in 2019. This optimism is largely dependent on Gold’s positive forecast for 2019.
According to reputed commodity analysts, the precious metal, which has significant industrial usage, was dragged down by weak base metals, in particular, copper which fell dramatically from a nearly four-year high in early June. Another blow to the metal was trade war fear, which slowed down the developing and developed economies alike. However in 2019 silver is expected to shake off its industrial influences and shine as a monetary metal, which may even outperform gold, as the U.S. dollar weakens on the Federal Reserve slowing down its monetary tightening policies. The dual factors of a strong gold and a positive economic outlook have made us be bullish on the silver.
5. Buy Gold, target 34000, CMP 32000. Indian gold was up almost 8% in 2018 as the Indian Rupee depreciated as much as 14%, before settling down to 10% in 2018. The market outlook on rupee is positive, but the yellow metal still looks to be a very favorable investment option. The European economy is seeing revival. This will push the Euro higher against the US dollar and support bullion. The economy of Japan has also started to recover.
The Federal Reserve will only be able to raise interest rates once or twice in the next year as the U.S. economy starts to slow down. This will weaken the dollar and strengthen the gold. The weakening dollar will again drive the hot money towards Indian and Chinese markets. Increased investments reflect in increased wages and increased demand for gold. Indians Hence gold is expected to shed off the previous fiscal year’s worries and will take an upward flight toward 34000.
At Shyam Advisory, we publish regular MCX Tips, Crude oil tips and commodity Tips. We publish our reports after thorough analysis and decisions are taken in light of key parameters. However, given the very nature of the market, it would be unfair to expect every single prediction seeing the light of the day. Readers must practice caution while following any MCX tips and keep a stop loss in place, depending upon their risk appetite. Subscribe to Shyam Advisory to get regular trading tips and stay updated with the commodity market.