[May 17, 2012] Analysis: Bull-run of China's commodity market not yet at an end Tweet BEIJING, May 17, 2012 (Xinhua via COMTEX) -- As crude oil and copper prices have been falling persistently, discussions about whether the staple commodity market is moving into a bearish period are hot in the market. Jiang Mingde, chief economist for Guojin Futures, notes that the commodity market has not ended its bull-run but admits the market is undergoing a correction weighed on by sliding economic growth and a strong rally of the US dollar. The commodity market began its current bull-run in the early period of 2004. Despite recent declines, major commodity prices are far higher than the valley of 2004 and also higher than the lowest point in 2010. Besides, the end of a bull-run usually happens in a period of economic recession. Although the economies of China and the United States have been growing slowly, while Japan and European countries are finding it hard to maintain any economic growth, the global economy is still maintaining a positive growth trend. It is too early to say that the global economy is slipping into recession. Of course, slowdown of global economic growth will affect the demand for major industrial products but this is different from a negative growth of commodities demand caused by economic recession. Official statistics show that China's economy has seen a slowing pace of growth so far this year, with the rise lower than average in the past 10 years, while inflation has been higher than average in the 2002-2011 period, indicating a downbeat economic situation. However, Chinese economy is still recovering mildly compared with the period of the financial crisis in 2008-2009, Jiang says. In addition, the recent fall of staple commodity prices is closely related to financial and economic situation in Europe and China. The worries over the European debt crisis and China's slowing economic growth have triggered capital flow to the United States. The trend of the USD index has been opposite to the trend of USD-dominated commodities prices. The renewed emergence of financial risk has disrupted market sentiment, pushing capital to withdraw from the risky markets by liquidating holdings and then pursuing relatively safe investments. The US's high financial security level and sound economic situation have made it an ideal destination for capital flight. Jiang also predicts that the staple commodity market will be unlikely to tumble across the board in the coming months but says commodities' performances may differ. For copper, the bellwether of staple commodities, its tight supply/demand relationship is expected to be reversed due to increasing supply and falling demand. In the light of this, the red metal's price may fall by a higher range than other nonferrous products. However, gold and silver prices have the possibility to rise in the third quarter when market sentiment is stabilizing and the consumption peak season is approaching. The economist strongly believes that staple commodity prices will return to an upward track, as the European situation is becoming clear and many countries are implementing economic stimulus policies. (Edited by Liu Xiaoyun, [email protected]) [ Back To TMCnet.com's Homepage ]