Commodity Market Outlook 2023: Factors Affecting Commodity Prices
Commodity Market Outlook 2023: Factors Affecting Commodity Prices

Last year, commodity prices had a mixed performance due to various influences. Gold surged to an all-time high, surpassing $2135 an ounce, driven by global uncertainties and expectations of a US Federal Reserve rate cut. However, other commodities like silver remained relatively stable around $24.10 an ounce.

In the local market, both gold and silver hit record highs due to strong overseas prices, a weak Indian rupee, and increased jewelry demand.

Geopolitical tensions like the Israel-Hamas conflict and the Russia-Ukraine war increased demand for safe-haven assets, supporting gold prices. However, concerns about the global economy and oversupply affected energy commodities. Crude oil traded with a negative bias on NYMEX, while natural gas prices dropped about 40% since the year began.

China, a major player in the commodities market, fell short of anticipated oil consumption levels, impacting global oil prices. Despite production cuts by OPEC Plus countries, including Russia, high output from the US and increased production from other OPEC members kept oil prices down.

Natural gas prices remained low due to high inventory levels, increased output, and concerns about industrial and heating demand.

Base metals faced pressure as fears of oversupply, the US Fed's rate hike policies, and uncertainties in the Chinese economy affected demand. Copper, aluminium, zinc, and lead prices dropped from their January highs on the LME platform.

China, the largest consumer of commodities, experienced a shaky economic recovery, impacting demand for various commodities. Issues in sectors like property, exports, debt, unemployment, consumption, and investment contributed to this uncertainty.

Looking forward, traders are closely monitoring the US Federal Reserve's policy decisions, as rate cuts could boost global economic growth and demand for commodities. Factors like the US dollar's performance, China's economic outlook, and ongoing geopolitical tensions will continue to shape the commodity market in the coming year.

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