MUMBAI: Commodities across the board hit multiweek and multiyear highs, spurred by reports of positive manufacturing data from across China, the US and Europe and on hopes of an increase in demand as economic recovery gains traction.
Indian traders and commodity exchange officials believe that investors have been diversifying their portfolios to include commodities as returns on investment have been superior to those generated by traditional assets such as equities . While copper, gold and oil hit three week highs on the overseas markets, gold and silver in local commodity exchanges headed towards their lifetime highs hit on November-end and Wednesday respectively. Record price of the yellow metal has put a lid on physical demand, with gold of 99.95% purity quoting at 20,937 per 10 gm in Mumbai, down from its record high of 21,058 on Tuesday, according to Kumar Jain, a retail jeweller in Zaveri Bazaar.
Copper advanced for a third day to the highest level in almost three weeks after manufacturing in China, the US and Europe expanded, adding to signs of a revival in demand. Copper for three-month delivery on the London Metal Exchange rose as much as 1.5% to $8,716 a tonne, the highest price since November 12, and traded at $8,715 a tonne at 3:50 pm Singapore time.
Palm oil advanced for a fourth day, touching the highest price in more than two years, on speculation that global demand for vegetable oils will increase. The February-delivery contract gained as much as 1.6% to 3,540 ringgit ($1,123) a tonne on the Malaysia Derivatives Exchange, the highest price since July 2008.
Gold gained for a fourth day, trading near the highest in almost three weeks, amid lingering military tensions on the Korean peninsula and after China's imports of the precious metal surged almost fivefold. Immediate-delivery gold rose 0.4% to $1,393.50 an ounce at 5:30 pm in Tokyo after touching $1,397.50 on Wednesday, the highest price since November 12. Bullion has gained 27% this year, reaching a record $1,424.60 an ounce on November 9.
Oil traded near the highest price in three weeks as signs of economic recovery in the US stoked speculation that fuel demand will increase in the world's biggest crude consumer. Venezuelan energy minister Rafael Ramirez said $100 is a barrel a "fair price" for oil and that OPEC is unlikely to change its output quotas at its meeting later this month.
Thanks to the current rally, brokers in the local market are expecting higher upside but are advising their clients to trade with strict stop losses in light of huge volatility amid the Eurozone problems and tensions between North and South Korea. Continued pumping in of trillions of dollars by the US Federal Reserve is expected to boost commodity prices further.
For instance, leading south-based broker JRG Wealth Management expects prices of gold, silver, crude and copper to rise in the near term. "Those wanting to place bets in the near term or on an intraday basis should do so only with strict stops in place," said Harish Galipelli, research head (commodities), JRG Wealth Management.
Data from Angel Commodities show that volatility of silver in November, measured on an annualised basis, works out to 40%, while that of crude and gold are lower at 18.4% and 15.1% respecitively. The rupee's depreciation adds to the price of an international commodity which India imports. For example, overseas gold hit a high of $1424 an ounce (31.10 gm) on November 9 but local gold futures made a lifetime high of 20,874 per 10 gm on November 30 by which time the rupee had depreciated by 3.5% at 45.88 to the dollar.
Sumesh Parasrampuria, director-business development, MCX, told ET earlier that one of the reasons for the exchange posting record average daily volume in November was because of portfolio diversification, among other things. "From last Diwali to the current year's festival, gold and silver have returned 28% and 32% respectively against 18% by Nifty, which is one reason that investors are being drawn towards commodities," Mr Parasrampuria said.