Will there be a decline in commodities?

Indices fell to almost sword market levels. Bonds have fallen sharply in price. World currencies fell against the US dollar. Cryptocurrencies, SPAC and other speculations have collapsed. The Bloomberg Commodity Spot Index rose 33 percent this year, with energy, metals and agriculture prices making the biggest gains. By April this year, $ 21.4 billion had been invested in commodity ETFs, up from $ 63 billion in outflows in the first four months of 2021, according to Morningstar. The bulls may soon regret their enthusiasm, as both supply and demand appear to be declining soon.

The repeat Covid-19 wave has led to continued blockages in China, causing a dramatic reduction in production in the world’s second-largest economy, which accounts for 18.1% of world gross domestic product and 23.9% of production. This affected imports of goods such as oil, copper and iron ore to China from countries such as Brazil, Chile and Australia, as well as exporting producers such as Germany, South Korea and Taiwan. According to Nomura Holdings Inc., Chinese iron imports fell 13 percent in April from a year earlier, copper fell 4 percent and car and chassis imports fell 8 percent.

Bad weather can disrupt the stability of cereal crops. Cartels can also encourage disruptions. As a key example, OPEC +’s actions make it difficult to forecast oil prices.

Copper prices are down 14% from their peak in early March. Copper is used in almost every commodity produced – from cars, machines and appliances to computers, so it is a great substitute for the global recession. In addition, copper does not have a cartel, neither on the demand side nor on the supply side, which could disrupt the main economic forces.

Coppers predict abundant demand in the coming years as it is widely used, such as the production of batteries for electric vehicles and other electric uses.

 Dealer Veselin Zlatev

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