Commodity prices have fallen sharply on fears of a second wave of covid-19 spread, only to recover on hopes of another stimulus coming. Base metals, bullion and energy futures started with a sharp decline of up to 4 per cent on MCX but recovered later in the day amid high volatility.
Most prices have improved smartly over the past month, with those of industrial commodities jumping by 3.5-12 per cent from their recent lows about a month ago. The upsurge was driven by hopes of a revival in demand with the gradual opening up of the global economy from months of a Covid-19-induced lockdown.
Manufacturing activity in factories across the world came to standstill due to a sequential lockdown which caused a slump in the demand of industrial commodities like base metals, energy and bullion, taking it to ‘nil’ in February and March. In April, however, global economies led by China opened in phases, bringing manufacturing, distribution and retail businesses gradually back on track. With customers starting to come back to the stores, manufacturers also bumped up their purchases of raw materials like copper, zinc, aluminium, gold and silver.
Countries like the United States, China, Japan, European Union and India have already announced massive stimulus to prevent economies from steep contraction. Now, experts are forecasting second round of economic stimulus which would probably give a fillip to consumer demand and eventually the global economy.
Meanwhile, the Covid-19 pandemic has caused contractions in global economy with developed countries like United State and Europe are facing huge pressure on growth. At least, increasing unemployment rate in the United States has posed a threat to the US economy. With the presidential election in the US is scheduled towards the end of calendar 2020, controlling unemployment is gradually becoming a big challenge for the president Donald Trump.
It is the same for India as well. Economists estimate around 120 million people have been rendered jobless due to the Covid-19 pandemic which forced closure of factories in the nationwide shutdown for 70 days. Experts say that the economic stimulus would help people buy necessities and thus, work on stalled projects or commencement of new ones would be difficult.