While coal and crude were the best performers in the last 12 months, the worst performers, ironically, were gold and silver, which dipped 4.7% and 2.9% after rising amid the flight-to-safety following the pandemic-induced economic crisis last year, according to an analysis by Care Ratings. Coal has seen demand firing up even as the world is trying to arrive at a consensus on net-zero emissions.
One reason for the rise in prices is India, which has seen a renewed demand for power as the economy came out of restrictions that were brought in because of the pandemic.
Besides coal and crude, no other commodity or asset has come close to doubling its price in the last 12 months. While the sensex has doubled from its post-Covid bottom, it has gained only 38% since last Diwali. The other commodities that have done well are copper (45%) and soya oil (27%).
The price increases have an element of demand, but this is not great long-term news for investors. Care Ratings has said that there are bright lights shining all around (in terms of macroeconomic numbers) and it does seem that the economy is witnessing a turnaround.
The report, however, cautions that what held good for last year may not hold for the next 12 months. While the agency has retained its 9.1% growth forecast, this expansion is because of a smaller base and the economy is still not in a revival.
“We should also keep in mind the fact that all these good numbers are in the realm of consumption and not investment. Infra spending is still restricted to government and the pace of private investment is limited. This will be a major cog in the process of growth, and we expect a revival only in FY23. For the rest of the year, it will be, at best, stable,” the report said.
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