What do commodity traders plan to bet on in 2018?

2017 is coming to an end. Traders are ready to close their books and gear up with new strategies for the new year, 2018. Portfolio spoke to a few commodity traders to find out how their trading year 2017 was, and what they are betting on in 2018.

2017 has been a good year overall for all the most actively traded commodities like bullion, base metals and energy. The only exception is natural gas, which is heading for a negative close.

For the traders we spoke to, this year has been a mixed bag. For some like Deepak and Ganesh, trades in 2017 have given good profits. But traders like Ritu Jain and Siraj (name changed as per request), both new to the markets, are set to close their trade books in loss.

Deepak from Ambur, Tamil Nadu, a full-time trader, prefers to trade silver, crude oil and lead futures contract on the Multi Commodity Exchange (MCX). “Lead was more profitable for me this year and silver has given me average returns,” says Deepak, who began his career when he was only 17 and has been in the market for about 15 years.

For Ganesh, a swing trader who trades part-time, 2017 has been a very good year. “The trades have given me around 25 per cent return overall this year,” says Ganesh, happily. His best trades were from the short positions taken in natural gas. “I made around 35 per cent return from a single trade in natural gas,” recalls Ganesh.

From base metals (copper, nickel, etc) to bullion (gold, silver) and energy (crude oil, natural gas), Ganesh likes to trade in all the most liquid futures contracts on the MCX. “Because of the liquidity issue, I avoid trading in agri-commodities,” adds Ganesh, who has been active in the market for about 11 years now.

Any asset class on a strong surge attracts new participants. The commodity segment is no exception. Ritu Jain from Agra and Siraj from Mumbai, both part-time traders and new entrants to commodity trading, have met with losses this year.

Ritu trades in almost all commodities whereas Siraj prefers base metals.

“Lack of knowledge about the market has resulted in loss for me this year,” says Siraj, ruefully. However, he feels that going forward these losses can be recovered. “Every loss trade is a learning for me and I am now confident that in 2018, I can perform well and recover all the losses of 2017,” asserts Siraj.

Even for experienced traders like Deepak, there are a few trades that went from bad to worse. “A short-term trade system I developed has given me a huge loss of about 60 per cent in the trades made in crude oil,” says Deepak.

As curtains on 2017 are all set to fall in a week, traders are gearing up for 2018 already. Surprisingly, experienced traders Deepak and Ganesh are betting big on gold and silver next year. They feel that the continuous trend of underperformance of both gold and silver over the last few years is likely to reverse in 2018.

“A strong correction in 2018 in the equity markets which have rallied sharply this year could see the market shifting towards safe assets like gold,” says Ganesh. “If you ask me to buy something today, I will buy gold for the long term,” adds Ganesh.

Deepak, on the other hand, expects silver to outperform gold. “I expect silver to reach ₹45,000 per kg levels and give a return of about 50 to 60 per cent in 2018,” says Deepak.

He also feels that the current rally in crude oil prices may not sustain in 2018. He expects prices to stay in the same 600-point range within which they have been trading over the last one year. “The threat from an increasing demand for alternate energies can cap the upside in crude oil prices,” says Deepak.

Ritu Jain expects base metals to do well in 2018. “Strong global industrial growth can increase demand and push base metal prices higher next year,” says Ritu. On the contrary, Siraj does not foresee any strong rally in the commodity space next year as the fundamentals, to him, look weak. “The commodity market is driven largely by Chinese consumption. Growth in China seems to have stagnated and the demand could dampen, going forward, which, in turn, can keep commodity price rise under check,” says Siraj. He expects the commodity space to remain broadly in a sideways range next year.

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