Last two years has seen a rapid rise in stock price over the world. This period has also coincided with a slump in commodities price in general. If we see the trend emerging out is that investors are dumping commodity linked product in favour of Equity based products for better returns. This has resulted in selling on the commodities front.
Will this be a trend going forward? It is difficult to say how investors react to depressed commodity prices over prolonged period of time. Are the equity markets a barometer for improving economy? The equity market performing well over a period of time translates into higher returns for the corporate sector for sustainable development.
Lack of interest among the trading community and with demand being depressed price of base metals has negative tones. But with increased corporate profits there can be increase demand for industrial metals in the medium term . Political volatility can certainly alter the demand curve.
We need to closely watch the results of corporate and expected forward earnings in order to take a call on metal prices and whether economy is improving resulting in increased demand. With money being withdrawn from the commodity space it is difficult to imagine a very meaningful and sustainable rally in commodity prices going forward.