During a chat with CNBC Awaaz on 1st June 2022, Dhan Founder Jay Prakash Gupta was asked about the falling base metals prices. The following is a transcript of his views as seen on the show.
May 2022 was an unkind month for commodities, especially base metals like Copper and Aluminium. Jay Prakash Gupta, Dhan’s Founder, opined that several factors have led to falling base metal prices.
Why are Base Metal Prices Falling?
The price of base metals has been dragged down heavily by inflation. However, India isn’t the only economy that’s struggling with rising costs. The Eurozone is also experiencing a marked surge in inflation.
In fact, inflation in the Eurozone was a staggering 8.6% in June 2022, a record high that’s made the region prone to surging energy and food prices.
Not to forget, the US, one of the major players in the base metals industry, is already trying to curb rising prices and 40-decade high inflation by pulling back liquidity.
That’s why inflation as a whole may have led to a global slowdown in a world, which is far more interconnected than ever. Moreover, businesses focusing on clean energy are also experiencing a slowdown.
This may have dragged aluminium and copper prices as both base metals are a part of the top raw materials consumed by the companies operating in the clean energy industry.
One-sided buying in base metals seems to be approaching a full stop unless the geopolitical scenario eases down.
What Does This Mean for Investors?
While the sentiment around commodities has been bullish across 2022, the current scenario has led to a focus shift. This implies that a cautious approach towards base metals is necessary.
Jay opined that Aluminium, which was trading at Rs. 280 not so long ago before the interview, could reach 210-220 based on the factors discussed before.
Aluminium July Futures were trading in the range of Rs. 208 to 222 between 15-06-2022 and 23-06-2022.
Furthermore, he also opined that Copper could fall to Rs. 700-710 or 10% less in June 2022. Copper July Futures were trading between Rs. 694 to 705 on 22-06-2022 and 23-06-2022.
Current Status of Base Metals
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Disclaimer: This blog is not to be construed as investment advice. Trading and investing in the securities market carries risk. Please do your own due diligence or consult a trained financial professional before investing.