Commodities remain in focus as central banks grapple with inflation and the possibility of further interest rate hikes. Kunal Shah, Head of Commodity Research at Nirmal Bang, has outlined his top five buy-on-dip picks in an interview with Business Today TV, naming gold, silver, copper, crude oil and sugar. He cites continued liquidity injection, currency debasement and supply-side pressures as the key drivers behind his bullish outlook.
Gold and central bank buying
Shah sees gold as a strong beneficiary of the current macro environment. While fears of rate hikes by the Federal Reserve and the Bank of Japan have weighed on sentiment, he argues that large-scale central bank diversification is supporting the gold price. Many central banks have been adding to their gold reserves in recent years, reducing reliance on the US dollar. Shah believes this structural demand will continue to underpin the market, making any pullback a buying opportunity.
Silver, copper and crude oil
Industrial metals also feature in Shah's buy list. Silver and copper are expected to benefit from the energy transition and infrastructure spending, as well as from the same monetary backdrop that supports gold. On crude oil, Shah points to depleting global reserves. He argues that Brent crude could move well above the $100 per barrel mark as supply tightens, regardless of short-term demand wobbles.
Sugar: a 33% surge potential
The most specific call in Shah's list is sugar. He predicts the soft commodity could rally by as much as 33% from current levels. Two factors underpin this view: the El Nino weather pattern, which typically disrupts production in key growing regions such as India and Thailand, and India's E20 mandate, which requires increased ethanol blending from sugarcane. Both forces are expected to squeeze supply and push prices higher.
Broader commodity outlook
Shah remains broadly bullish on the commodity complex despite the headwinds of potential monetary tightening. He sees continued liquidity injections by major central banks and the long-term trend of currency debasement as powerful tailwinds. For traders, his advice is to build positions on dips rather than chase rallies. The five commodities he highlights — gold, silver, copper, crude oil and sugar — are chosen for their individual supply-demand dynamics as well as their sensitivity to macro trends. Investors can monitor the current live gold price and related commodities as a starting point for their own analysis.
Key takeaways
- Kunal Shah picks gold, silver, copper, crude oil and sugar as top buy-on-dip commodities.
- Central bank diversification is a key driver for gold’s long-term rally.
- Depleting global crude reserves could push Brent past $100 per barrel.
- El Nino and India’s E20 ethanol mandate could lift sugar prices by 33%.
Common questions
Why is Kunal Shah bullish on commodities despite rate hike fears?
Shah believes that continued liquidity injection and long-term currency debasement outweigh the impact of potential interest rate hikes, making commodities attractive on dips.
What is the E20 mandate and how does it affect sugar prices?
India’s E20 mandate requires fuel to contain 20% ethanol by 2025-26. This diverts sugarcane from sugar production to ethanol, reducing sugar supply and supporting prices.
Which commodity does Shah expect to rise the most?
He gives the most aggressive price target for sugar, forecasting a 33% surge from current levels due to El Nino and the ethanol blending mandate.
Shah's analysis offers a clear framework for understanding the current commodity landscape. While risks such as central bank tightening remain, structural factors may keep prices elevated. As always, investors should consider their own risk tolerance and do their own research before making any trading decisions.