Commodity Prices Expected to Weaken This Year, Says Chowdhury
According to Sabrin Chowdhury, the head of commodities analysis at BMI, a research and data firm, commodity prices are likely to see a decline this year compared to the previous year.
Chowdhury discusses China’s commodity demand and highlights the sectors that will be most affected by this trend.
Additionally, she shares her outlook on the future of gold and silver.
The current situation in the commodities market indicates that there are factors limiting their growth.
Chowdhury emphasizes that there are no signs of recovery in China, which plays a crucial role in the global commodity market.
Although China is on the path to recovery, it is mainly led by the services sector.
Contrarily, the manufacturing sector has experienced contraction, while services have shown expansion.
Consequently, this year’s recovery in China is expected to be led by services rather than manufacturing and construction, which are heavily dependent on commodities.
As a result of this shift, a negative sentiment is brewing towards commodities in general, along with weak demand from China due to the dominance of the services sector.
Therefore, it is highly likely that commodity prices will weaken this year compared to the previous year.
The commodities most likely to experience the greatest downside are those associated with construction, such as iron ore and steel.
On the other hand, there is some hope for the auto industry, which could drive demand for copper and aluminum.
Looking ahead, beyond 2023, there is an expectation of a stronger rebound in “green transition” metals.
These include copper, lightweight aluminum, and green steel, which are associated with the green energy sector.
It is predicted that commodities related to green energy will have a brighter future compared to non-green transition commodities.
In terms of precious metals, Chowdhury expresses a bullish sentiment.
The rally in gold and silver prices is anticipated to continue, driven by factors such as the U.S.
Federal Reserve’s hiking cycle and the end of the tightening cycle.
As interest rates reach terminal levels, demand for safe haven assets like gold tends to increase.
Gold prices are already elevated due to several reasons, including recession risk, a sideways to slightly weaker U.S.
dollar, and the nearing end of the U.S.
Federal Reserve’s tightening cycle.
Chowdhury expects gold prices to rise further, possibly reaching all-time highs.
In summary, Sabrin Chowdhury’s analysis suggests that commodity prices will weaken this year, particularly in construction-related commodities.
However, she sees potential for a rebound in green energy commodities in the future.
Furthermore, her outlook on precious metals, particularly gold, remains positive for this year, with the possibility of reaching new highs.