How The Commodity Price Slide Affects You

  Author: Abhijit Banerjee

Is the recent run up of the international commodity prices over? Well, that is the question many commodity experts are asking in different international commodity markets. All commodity prices, especially of metals, have been moving up from the period starting with election of US president Donald Trump. For the past week or so, it seems that the gravity-defying period of commodity prices is over. Their prices, like that of crude oil and metals are at their 4-11 month lows, having typically lost 5-12% in the last one month. It seems the wave of euphoria from the time of US presidential elections has now ebbed. Instead, concerns like those about Chinese manufacturing and political events in Europe have begun to play a role.

Advantage investors While this might be good news for commodity investors who were waiting for corrections to make fresh investments, a lot of the benefit will accrue to investors in stock markets where investors having shares of companies that spend a lot of money buying commodities. The decline in international commodity markets will obviously enhance their profitability. 

India, as a country, will benefit if the international oil prices go down and stay low, given the major role oil imports play in the country’s finances. This will also mean some upward pressure, strengthening the rupee. This could potentially put some more pressure on India’s efforts to boost exports and could hurt the prospects of IT companies. Of course, if you are an existing commodity investor or have invested in a company in the commodity business, you will look to ride out this period.