Base Metals Rally Expected to Continue Amid Supply Disruptions
The commodity market is experiencing a broad rally that extends beyond energy prices, according to Anindya Banerjee, Head of Research-Currency, Commodity and Interest Rate Derivatives at Kotak Securities. Base metals are increasingly attracting investor money due to supply disruptions and longer-term shortages, supporting prices.
Banerjee expects the trend to remain strong in base metals, with copper, zinc, and aluminium being closely watched. Copper has additional support from the expected tariff story next year, while zinc and aluminium face supply disruptions. The situation around the Strait of Hormuz could further affect the metals and energy markets.
The oil market is also facing tightening supply conditions, with inventories being drawn down since March. Disruptions through Hormuz and the Red Sea are adding pressure, and Banerjee expects Brent crude to move towards $110 a barrel in the short term, with $110-$115 possible if Hormuz flows do not normalise.
For India, higher oil prices could put pressure on the rupee and the current account deficit. Banerjee expects the rupee to move towards 86-86.5 per dollar, where he believes the Reserve Bank of India (RBI) would become more aggressive in intervening. Within precious metals, Banerjee is more positive on silver than gold, seeing $66 per ounce as a strong base for silver and expecting it to reach $71 per ounce over the next few weeks.