Global macro headwinds and crude volatility to drive commodity markets: Kotak Neo
Kotak Neo's Anindya Banerjee explains how crude volatility and US Fed policies are shaping gold, silver, and copper markets.
Global central bank policies, the unpredictable nature of crude oil, and shifting macroeconomic factors are set to be the primary drivers of short-term commodity trends. This insight comes from Anindya Banerjee, the Head of Commodities Research at Kotak Neo, who provided a comprehensive outlook on the trajectory of precious metals, energy, and base metals.
Global Macro Headwinds and Crude Volatility to Drive Commodity Markets: Kotak Neo
The New Dynamic of Precious Metals
Contrary to the traditional view of gold as a "safe haven" during times of turmoil, Banerjee suggests that gold is currently behaving differently. According to him, gold and silver are presently tracking macroeconomic fundamentals, specifically acting as a play on the real interest rates of the US dollar.
The recent selling pressure observed in bullion is closely linked to rising oil prices, which have sparked expectations that the Federal Reserve may extend its cycle of rate hikes. However, the domestic scenario in India tells a different story. Despite the global turbulence, there has been a noticeable surge in jewelry and physical gold consumption since Navratri, a trend expected to persist throughout the festive season. Long-term stability for precious metals continues to be supported by institutional buying and the accumulation of reserves by central banks.
Energy Risks and Inflationary Pressures
The volatility of crude oil is not just a global concern but a direct threat to India's economic stability. Banerjee warned that elevated crude prices are likely to push domestic inflation higher, predicting that inflation will continue to rise at least until January or February of the coming year.
Current data shows that the Wholesale Price Index (WPI) remains elevated, while the Consumer Price Index (CPI) is edging closer to the 6 per cent mark. This puts significant pressure on the Indian rupee. Regarding currency movements, Banerjee noted that the Reserve Bank of India (RBI) maintains clear intervention boundaries, with a floor around USD/INR 94.30–94.40 and aggressive action expected if the rate approaches 95.50.
Industrial Metals and the AI Connection
When discussing base metals, particularly copper, Banerjee highlighted a strong correlation with US trade policies and the technology sector. He explained that copper movements are largely influenced by US tariffs. Furthermore, he pointed out a surprising link to the tech world, noting that if the "AI trade" faces a significant downturn in the coming weeks, it could negatively impact copper prices.
Strategic Advice for Retail Investors
With both equity and commodity markets experiencing choppy waters, Kotak Neo suggests that retail investors use commodities as a tool for structural portfolio hedging. Banerjee believes that now is an opportune time for allocation, as various global risks could potentially hit the markets as we move toward 2027.
For those looking to protect their portfolios against broader global uncertainty, he recommends viewing price dips in gold and silver as attractive entry points.