Sananda Sahoo
Pradeep Unni, head of trading and research at Richcomm Global Services in Dubai, believes that there is considerable upside in the coming months for gold, silver and platinum.
What is the asset class and geography you are focused on?
I primarily focus on commodities and that has been my forte for more than 14 years now. My focus ranges from bullion to agricultural commodities to base metals. I sincerely believe that commodities could provide investors the yield they are looking for. Commodity trading is a separate asset class with good growth potential, and with global interest in commodity trading far exceeding those of equities, trading in commodities simply cannot be ignored.
What is the outlook for the month ahead?
In the coming months, commodities, especially bullion such as gold, silver and platinum, and industrial metals, such as copper, aluminium, zinc, nickel and tin, should see further gains and agricultural commodities, especially soybean, corn and wheat, should see significant downside.
What are the main risks, either upside or downside, to the outlook?
The main and the key risk to our commodity outlook is currency fluctuations. Since commodities around the world are priced in US dollar, a strong currency makes commodities cheaper and vice versa. Sharp currency movement can undermine any fundamentals of a commodity. As far as agricultural commodities are concerned, weather is the biggest threat to our outlook.
What is the best investment at the moment?
We are bearish on agricultural commodities. The USDA's [United States department of agriculture] initial crop forecasts for 2015-16 suggest that the world corn, wheat and soybean markets will remain well supplied. Among these three crops, soybeans are more bearish than the others because of the increasing glut on the world market. Our estimate suggests that supply will outstrip demand for the fourth consecutive year by 13.5 million tonnes. This means that global soybean inventories will jump by almost 14 per cent in 2015-16 to a record 97 million tonnes equivalent to almost one-third of the global consumption. The weather over the next few months will, of course, play an important role in determining the overall level of crop supply this year. Nonetheless, in the absence of a major supply shock, we continue to forecast the prices of all three crops to fall further this year. In addition to this, renewed US dollar strength against the euro, Brazilian real and Russian rouble will further add to the selling pressure. Considering the recent price stability in bullion in recent months compared to the other commodity sectors, we believe that there is considerable upside in the coming months for gold, silver and platinum. Though US Fed rate hike fears and dollar strength will remain the major headwinds, increased demand from China and India should compensate for the lower investor appetite. Multiple data suggests that gold exports from Switzerland to China and India doubled in March and April this year. Among these, we are more bullish on silver and expect it to trade over $24 to $25 an ounce towards the end of the year.
What was the best investment you were ever involved in?
During November last year, we had a strong view that crude oil prices will sink further and probably trade below $50 a barrel over the next few months. Based on this view we took large buy positions in put options (around $75 a barrel) for WTI crude oil and booked profits after the market fell below $50.
What was the worst?
Considering the excess inventory of copper at the London Metal Exchange warehouses, strength in US dollar and the decrease of investment demand in China, we expected copper prices to remain weak. We advised [clients] to be on short side of the market – around $6,000 a tonne – during the early part of the year. However, prices have refused to budge and instead spiked to over $6,400 a tonne.
ssahoo@thenational.ae
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Trader profile: Bullion and industrial metals’ outlook appears rosy
Pradeep Unni, head of trading and research at Richcomm Global Services in Dubai, talks about investing in metals and commodities.
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