Will Omicron Hamper The Commodity Run?
As commodity prices surged to a decade high in 2021, can the new covid variant prove to be a deterrent? Let's find out.
The prices of some commodities rose to or exceeded levels not seen since the spike of 2011. Like with commodities, natural gas and coal prices touched record highs during supply limits and increasing demand for electricity. Although they are likely to drop in 2022 as the demand would decrease and supply increases after the pandemic. However, additional price spikes may occur in the near term amid very low inventories as the new variant treat is uncertain. The government has suspended future’s trading for seven agricultural commodities. This move was made to put a rein on the soaring inflation. Cotton has surged the most by an astonishing 4.61 per cent. Not far behind are the copper and lead prices rising 3.72 per cent and 3.70 per cent, respectively. The price of Zinc has also zoomed by 3.86 per cent, the highest increase among the MCX commodities. The construction of new production facilities or processes, new uses or the discontinuance of historical uses, unexpected mine or plant closures and industry restructuring - all have affected metal prices to go up. The price of gold bullion has seen a decline in recent movements. The factors that caused the decline is currency movements (quantitative easing, interest rate movement in Europe and US, and import duty structure), have led to gold margins getting eroded.
MCX metal price seems positive due to increase demand all around the world. Also, the effect of the omicron variant has not much affected the global market prices of the commodities as of now.
In December short term energy outlook remains subject to heightened levels of uncertainty, related to the ongoing recovery from the COVID-19 pandemic. As the US GDP declined, the emergence of the omicron variant raises concerns about energy consumption throughout the world. This resulted in the prices of Crude oil and Brent oil going up in the global market by 2.96 per cent and 1.57 per cent. The petroleum prices see a decline next year after the COVID-19 Omicron variant cases decline. Due to insufficient electricity availability industrial production in China and India was affected by power shortages. Also, the construction industry was affected due to the covid pandemic. As the situation progresses the demand for metal started to pick up. As a result, the price of aluminium has ascended by 6.43 per cent. The spread of Omicron further looms on the global economy, sinking industrial demand. Lockdown restrictions have been tightening up in China and elsewhere, which is battling the outbreak of the new variant. A strengthening US dollar has added further build, while upward pressure made the silver rise 1.92 per cent.