April 29, 2016

A Case for Commodities!

By CA Rajiv D Khatlawala, Author How to Profit from Technical Analysis
During the past few years, especially post-Lehman crises, the Financial Markets have seen an above
normal volatility. In past five to six years, we have seen the US Dollar crash to sub 75 levels and
thereafter rally to 100 levels a huge volatility from viewpoint of currencies. On the other hand
Commodities which have a general inverse relation with the US dollar have crashed during the past
five to six year and only recently are they showing signs of revival and reversal!
Crude touched a multi-year low of $26 while Copper touched a multi-year low of $1.95 . Gold tested
sub-$1050 levels while the semi-precious Silver tested sub-$14.

But all of these levels seem to be a thing of the past, though they were recently achieved. This is
because the subsequent rise in each of these was fast.
Commodity
Crude Oil
Copper
Gold
Silver

% jump from recent Multi-year Lows

76%
25%
23%
29%

Despite the nice gains from the lows, my view is that the party has just begun. In the next few
quarters, one can expect that the USD dollar will weaken against the three major currencies (but not
necessarily against emerging market currencies). And with its historical relationship with
commodities, a structured rise in commodities is something to look out for.
Being a person with a background of fundamental as well as technical (price) research, I can visualise
enough signs of the merging of both these factors. Also based on price analysis (technical analysis),
the long term charts of most of the commodities are suggesting long term bullish reversal. My belief
has always been that price charts dont lie simply because they are merely the mirror of the
collective actions of investors and traders.

Among the various commodities, there are some which, as per my analysis, are likely to give super
normal returns while others may give average / normal returns. I anticipate that investors who are
daring enough to trade commodities directly of course using price charts will have a great time;
while those dont want to trade them directly can think of commodity stocks which benefit from a
likely rally !

CA Rajiv D Khatlawala
Author How to Profit from Technical Analysis (Vision Books- 2008,2016)

Disclaimer: Please note that the above views are personal and of educative nature. The author cannot take responsibility for
any action taken by the user of this article. Please do your own analysis before taking any investing decision.