If the stock markets are rocking, the commodity market can’t be far behind. While the pall of gloom has not lifted from the global economy as yet, some indicators — especially the sharp rally in metal prices in the futures market — point out perhaps it is on the road to recovery. But commodity experts are unequivocal that this surge, which is also reflected in higher spot market prices, should be taken with a pinch of salt.

“There is a ‘the worst is over’ theory floating in the markets which is leading to increased buying interest in base metals. In the last three months, copper has risen by 49.79 per cent in the commodity futures market (one month forward) while lead has gone up by 43.08 per cent, nickel is up 61.2 per cent, zinc by 38.82 per cent and aluminium by 26.51 per cent. It is not to say that the price rise is completely unjustified, but it would not be true to claim that this rally is completely backed by fundamentals,” said Praveen Singh, commodity analyst, Sharekhan.

Marketmen say that the genesis of this surge lies in China re-stocking metals when prices had fallen substantially. Producers and importers in China have provided great support to base metals as they had anticipated them to go up in future. “The economic indicators from the US and the Europe have also contributed to this surge; the housing numbers are encouraging and the jobless claims in the US have also fallen. The numbers are less bad hence there is optimism amongst traders,” Singh said.

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