Five Commodities to Trade in 2022

The global commodities market saw a roller coaster ride in 2021 as a series of events shook the sector. Vaccines were rolled out, central banks kept their interest rates low, governments pumped more money into the economy, stock markets hit all-time highs, and the dollar surged to multi-month highs in the global financial market. The bullion component of the commodities market had a bumpy pattern, with gold trading in the $200 per troy ounce band and silver trading in the $8 per troy ounce range. Crude oil hit 7-year highs in 2021 due to improved global economic conditions, which increased demand while supply remained constrained due to major suppliers cutting production during the pandemic. Due to a supply constraint caused by mine and smelter closures, as well as significant development in the industrial sector, base metals, which move in line with the manufacturing sector, saw a substantial price movement in 2021.

Top Commodities to Trade in 2022

Gold

The gold prices showcased a bumpy ride in the year 2021 dropping from an all-time high hit in August 2020. The CME gold futures traded well below $2000 per troy ounce as the impact of coronavirus induced global economic growth started easing following roll-out of vaccines across the globe as well as efforts taken by the governments and central banks to bring the economy back on track. 

In 2021, the global gold demand was muted because of strength in other asset classes such as equities, bonds and currencies. During the first 9-months of 2021, total gold supply was 3505.10 tons, almost the same as that of the same period a year ago. On the demand side, total gold demand in the first 9 months of 2021 stood at 2755.80 tons, down by 4.61% YoY.

In 2022, gold would once again attract the attention of the market participants as it has been a favourite commodity because of its store of value, hedge against inflation and safe-haven asset in turbulent times. Demand from jewellery, ETFs and central banks would drive the gold market in 2022. Though other asset classes are showcasing a remarkable growth, we may expect a decent correction in the first half of 2022 which would be supporting for gold. CME gold is expected to trade in a broad range of $1680 - $1980 per troy ounce while MCX gold is forecast to range in the range of Rs. 44000 - Rs. 55000 per 10 grams.

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Silver

In 2021, the global silver market experienced thin trade, sometimes reacting to gold and other times reacting to industrial metals. CME silver traded in a tight $8 per troy ounce range in 2021, with a yearly low of $21.41 per troy ounce and a high of $30.35 per troy ounce. On the domestic front, MCX silver futures ranged from Rs. 15280 per kg to Rs. 73666 per kg, with a yearly low of Rs. 58386 and a high of Rs. 73666.

According to The Silver Institute, worldwide silver supply increased by 8.20 percent year over year to 1056.20 million ounces in 2021, while demand grew by 15.29 percent to 1033.10 million ounces. Global silver consumption increased by 15.29 percent year over year to 1033.10 million ounces in 2021, compared to a 9.98 percent year over year decline the previous year.

In 2022, industrial segments with rapidly rising economic conditions, as well as fabrication demand, will keep global demand for silver afloat. Strong manufacturing growth forecasts, as well as credit expansion among industrial nations, will drive up demand for silver. As a result, CME silver is expected to trade between $20.00 and $30 per troy ounce, while MCX silver is expected to trade between Rs. 55000 and Rs. 75000 per kg.

Crude Oil

Crude oil was the topic of the year in 2021, regaining their lost glory of 2020, as global oil demand began to improve following the global rollout of vaccinations. The, crude oil prices skyrocketed to hit 7-years highs.

Following the abolition of mobility restrictions and the global rollout of vaccination, consumer demand in 2021 grew steadily. The global economy is expected to grow due to improving economic conditions as reflected by numerous indices. As a result, oil producers began gradually increasing production, resulting in an increase in oil supply to 95.59 million barrels in 2021.

Oil prices are projected to continue to trade higher in 2022 due to strong energy demand, with both the OPEC and IEA forecasting consumption to exceed 100 million barrels per day. Government and central bank efforts to keep the economy on a growth path would enhance economic activity, resulting in an increase in demand for oil. WTI and Brent oil are forecast to trade in the range of $60 - $90 per barrel and $65 - $95 per barrel, respectively and MCX crude oil is forecast to trade in the range of Rs. 4500 - Rs. 6750 per barrel.

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Copper

Copper staged the strongest price action in the year 2021 with LME 3-month forward contract hitting an all-time high of $10746 per ton on robust demand from the world’s leading consumer i.e., China with strong growth in the equities market, growth in the manufacturing sector, housing sector, low inventories at exchange warehouses. 

According to the International Copper Study Group's supply-demand projections, world copper mine production climbed by 3.1 percent in the first nine months of 2021. The global refined copper output climbed by around 1.7 percent, with primary production increasing by 1% and secondary production increasing by 5.5 percent. During the first nine months of 2021, the world's apparent refined copper usage climbed by 1.5 percent. 

The copper outlook in 2022 looks bright with surging consumption demand from all the industrial nations. The copper inventories at LME registered warehouses are at yearly lows and government regulation on environmental aspects as well as wage-related issues at major mines are expected to keep the copper prices higher. LME 3-month forward contract prices are forecast to trade in the range of $8600 - $11000 per ton while MCX copper futures are forecast to trade in the range of Rs. 670 - Rs. 850 per kg. 

Aluminium

Aluminium prices soared to an all-time high across the board, owing to a supply bottleneck caused by mine closures, China's power curtailment, the global energy crisis, and decreasing exchange warehouse stockpiles. The LME 3-M aluminium forward contract prices surged by 64% to hit an all-time high of $3198 per ton from a yearly low of $1953.80 per ton and similarly, MCX aluminium futures rallied by 63% to touch an all-time high of Rs. 259.35 per kg from a yearly low of Rs. 159.20 per kg. 

The aluminium inventories at the exchange warehouse are witnessing continuous decline due to increased consumption demand following recovery in the global economic condition. Power rationing policies in China impacted the production to a large extent.

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Since the aluminium had corrected from an all-time high towards the end of 2021, it is still having a huge scope to scale to a fresh high in 2022 due to supply related concern. The production in the largest producer China is likely to be affected because of new environmental policies where the nation is pushing for greener energy. LME aluminium is forecast to trade in the range of $2400 - $3300 per ton and MCX aluminium is forecast to trade in the range of Rs. 200 - Rs. 280 per kg.