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Factors affecting commodity market:

 

Currently there is growing craze of commodity trading in India. Numbers declared from exchanges like Multi-commodity Exchange (MCX), ICEX (Indian Commodity Exchange), National Spot Exchange Limited (NSEL) shows the growth in volume day by day. But, there is also a negative corner to it, many times retail investors’ loose money in commodity market. Why this happens…..There is no fantastic market than it, then also why we are not able to make money in this market? Lack of knowledge of market is the major reason behind it. In this post, we have taken a view of factors which affects commodity market. Hopefully it will helpful to commodity traders.

  • First of all we should understand that though we are trading in Indian exchanges, domestic events have a very small role to play in commodities unlike to equity markets. Data releases from United States, European countries, Major metal consumer/producers countries like China, Chiele have major role to play in commodity market.
  • Indian market takes clue from International market like NYMEX (New York Mercantile Exchange), LME (London Metal Exchange) and varies accordingly.
  • Demand-Supply: More is demand; there will be more price rise. There is daily, weekly inventory data release from London metal exchange.Demand supply ratio can also be changed due to events like labor strikes at important strikes, environmental issues, Geopolitical situations etc.
  • Major factor which affects the base metal prices is Jobless Data (Unemployment claims) release from US. It is an indicator which majors the number of individuals who filed for unemployment insurance with the government for the first week than in the last week. In general, higher is unemployment, bad news for base metals and dollar which is U.S. currency.
  • Next important release is GDP release. GDP (Gross Domestic Product) is a primary Gauge of any nation’s health. Good GDP numbers especially from US and other European countries leads to more risk taking and rise in commodities like base metals.
  • FOMC meeting releases: US Federal Reserve declares the information about economic health and Federal reserve interest rates time to time .It has instantaneous effect on marker, especially precious metals like Gold and Silver are major to affect.
  • Retail Sales: This report is change in the total value in the retail sales. Positive figures indicate economic growth.
  •          Housing starts/New Home sales: This report is a measure of the number of new residential buildings which began construction during the previous month. It’s a leading indicator of economic health because building construction produces a wide-reaching riffle effect.
  •  Crude oil inventories are released normally on Wednesday (8 Pm IST),, has instantaneous effect on crude oil prices.
  • Natural Gas inventories are released, In general every Thursday (8:30PM IST).Report has instant effect on Natural Gas prices.

These are the very common factors. Traders are advised to keep close watch on datas time to time and avoid taking position before major release.

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Information provided on this blog is for general purpose only & not investment advice.Please take advice of SEBI Registered Investment Advisors before taking any investment decision.
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