Commodities eye key US consumption data for direction amid Fed’s cautious tone

The US dollar briefly slipped to 96.2, its lowest since February 2022, after the Fed delivered a widely expected 25 basis point rate cut

Commodities saw mixed trade this week (ended September 19) as markets reacted to a combination of the Federal Reserve’s latest policy decision and developments in US-China trade talks.

The US dollar briefly slipped to 96.2, its lowest since February 2022, after the Fed delivered a widely expected 25 basis point rate cut. However, Fed chair Jerome Powell emphasized that the move was a “risk management” decision rather than the start of a broader easing cycle. This less-dovish tone tempered expectations of aggressive rate cuts ahead, helping the dollar recover and close the week on a flat note at 97.6. Despite the cautious Fed stance, US equities rallied to record highs on optimism surrounding the first rate cut of 2025 and signs of progress in US-China negotiations, though no concrete details emerged on the TikTok deal.

Gold prices experienced a rollercoaster ride, retreating from a record high of $3,705.4 per troy ounce after Powell’s post-policy comments suggested the Fed remains cautious, dampening expectations for aggressive rate cuts. Additionally, better-than-expected US jobless claims and strong Philly Fed manufacturing data indicated the Fed may not need to rush further easing, adding more pressure on gold and pushing it to a one-week low of $3,630 per troy ounce.

Fed forecasts only one rate cut in 2026, highlighting growing uncertainty over the Fed’s longer-term policy path. However, gold staged an impressive rebound on Friday, closing near the session high of $3,685 per troy ounce, while silver surged above $43 per troy ounce, rebounding from $41.16 per troy ounce, as markets factored in the possibility of two more rate cuts this year.

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Kaynat Chainwala

Senior manager - commodity research|Kotak Securities

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On the daily chart, MCX Gold futures are consolidating near the recent highs after a strong upward rally. The price is currently trading around Rs 1,09,847 per 10 grams, holding above the immediate support zone of Rs 1,08,800–1,08,000. RSI (14) has eased slightly from the overbought zone but remains elevated near 74, indicating sustained bullish momentum. On the upside, a breakout above the immediate resistance at Rs 1,10,700 could open the door for further gains towards Rs 1,12,000. On the downside, a decisive move below Rs 1,08,000 may trigger a corrective decline towards Rs 1,07,100–1,06,900.

WTI crude fell to $62.6 per barrel, pressured by concerns over weak fuel demand, oversupply, and a stronger dollar. Additional pressure came as US President Trump called for lower oil prices to pressure Russia into ending the war in Ukraine. Geopolitical tensions remain elevated, particularly with Ukraine continuing drone strikes on Russian energy infrastructure, which could keep oil prices volatile in the near term.

Base metals faced selling pressure despite the rate cut, as sentiment turned cautious following Powell’s remarks on growing downside risks to the labour market, slowing economic growth, and persistent inflation, factors that have raised fears of stagflation and deterioration in demand outlook.

As markets continue to digest the Fed’s policy statement and updated projections, focus now shifts to upcoming speeches by several FOMC officials. Most notably, new governor Stephen Miran, the only member to vote for a deeper 50-basis point cut, will deliver remarks on Monday, which will be closely watched for further policy clues. Besides, China is expected to keep its loan prime rates unchanged even as recent data continues to point to sluggish domestic demand and deepening signs of an economic slowdown.

On the data front, markets await flash PMI figures from major global economies, final US GDP, and weekly jobless claims, but the most critical release will be the US Core PCE, the Fed’s preferred inflation gauge. If the Core PCE comes in as expected, it could strengthen the case for rate cuts in October and December, whereas a significantly higher reading could prompt a reassessment of easing prospects for the remainder of 2025.

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