Financial Daily from THE HINDU group of publications
Wednesday, Apr 26, 2006
Financial Daily from THE HINDU group of publications Wednesday, Apr 26, 2006 |
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Agri-Biz & Commodities - Outlook Record funds flow into commodities G. Chandrashekhar
Strong movers Fundamental demand and supply Other factors of non-fundamental nature such as geo-political concerns, inflation, currency fluctuations and fear of global economic slowdown are seen exerting influence on the commodity market.
Mumbai , April 25 As commodity markets of all description boom and prices soar to unprecedented levels, huge speculative interest across commodities is evident. Whether energy, precious metals, base metals or agricultural commodities, markets are on a roll for a host of reasons. In addition to strong fundamental demand and supply, other factors of non-fundamental nature such as geo-political concerns, inflation, currency fluctuations and fear of global economic slowdown are seen exerting influence on the commodity market.
Growing investor interest
The role of funds in the market's current volatile play is becoming increasingly important. Are commodities really emerging as an asset class in the league of equities, bonds and real estate? Going by the keen interest shown by strategic and tactical investors in developed economies, the answer is obvious. How much investment can commodity markets absorb? The capacity of the commodity market to absorb fresh investment inflows is now a key topic of discussion as interest among investors grows. The fact that US commodity futures market size has hit a fresh all-time high in terms of volume and value is widely seen as evidence of growing investor interest.
Historic high
Traded volumes in 23 of the largest US commodity futures markets covering energy, metals (base metals and precious metals) as also agriculture and livestock sectors, the number of lots traded hit an historic high of 8.4 million lots in the week ended April 22, almost double the number traded a year ago, according to reports. The volume of open interest has been on a steady upward trend for the past 12 months. However, its value has been more volatile of late, reflecting big changes in commodity prices. For instance, recently copper hit an all-time high, while zinc and aluminium registered near 17-year highs. Gold and silver, too, zoomed up to highs not seen for over two decades. Crude market is on the boil. The strength of commodity prices over the past few weeks has seen notional value measures of market size also hit a historic high of $367 billion, beating the previous all-time high of $362 billion reached in December 2005, showing a dramatic increase from $300 billion in early March. It is also roughly three times the amount of long-only institutional money now estimated to be invested in commodity markets, according to Barclays Capital.
More Stories on : Commodity Markets | Outlook
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