Commodities eye US inflation numbers, Chinese key data for further direction

Commodities outlook for next week

It was yet another volatile week (ended October 17) for markets as traders gauged worries about the health of US regional banks, easing concerns of further escalation in US-China trade tensions, coupled with growing prospects of a prolonged US federal shutdown.

The dollar slipped to 98 on fears of problems in the wider banking sector after two US regional lenders, Western Alliance Bank and Zions Bank, said they had been hit by either bad or fraudulent loans. Tense trade situation added further pressure on the greenback and US equities as China accused the US of stoking panic over its rare earth controls, while Trump blamed Beijing for the latest impasse in trade talks. However, Trump's acknowledgment that his proposed 100 percent tariff on Chinese goods would not be sustainable and his confirmation of a meeting with Chinese President Xi Jinping in two weeks in South Korea helped calm market nerves. As a result, the dollar closed the week with modest declines at 98.5, while all three major US equity indexes posted a nearly 2 percent gain.

Meanwhile, these developments weighed on COMEX gold, triggering a sharp pullback from a record high of $4392 per ounce to below $4200 per ounce. Still, gold ended the week with a 7 percent gain as safe-haven bids surged earlier in the week amid banking jitters and escalated further after Trump hinted at a partial decoupling from China. This followed China's sanctions on five US entities linked to Hanwha Ocean Co., one of South Korea’s largest shipbuilders, marking an escalation in tit-for-tat trade measures. COMEX silver, too, closed the week with a 7 percent gain despite a steep 5 percent drop on Friday, largely due to profit-taking after its unprecedented rally to a record high of $53.76 per ounce.

On the daily chart, MCX GOLD futures have formed a Bearish Engulfing candlestick pattern. A break below Friday’s low of Rs 1,25,957 per 10 gram could trigger further downside, with immediate support expected near Rs 1,23,650 and then at Rs 1,20,000. While a short-term correction is likely if the price stays below Rs 1,25,957, it may be premature to call it a trend reversal. On the upside, initial resistance is seen around Rs 1,31,000, followed by Rs 1,32,300.

NYMEX crude prices dropped to a five-month low of $56.6 per barrel and are down around 8 percent month-to-date, pressured by renewed US-China trade tensions, easing geopolitical risk premiums, and bearish supply-demand fundamentals for 2025 and 2026. Oil logged its third consecutive week of losses partly as the IEA projected a massive supply glut of 4 million barrels per day for 2026, citing soaring supply and subdued demand expectations.

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Kaynat Chainwala

Senior manager - commodity research|Kotak Securities

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LME base metals ended the week on a mixed note, reflecting the ongoing tug-of-war between rising trade tensions and persistent supply constraints. Copper and aluminium managed to post weekly gains, rising 0.85 percent and over 1 percent, respectively. Market sentiment turned cautious midweek as renewed US–China trade frictions, including tariff threats and fresh export controls, rattled global risk appetite and led to profit-taking across the complex.

Copper, which recently touched near 16-month highs, came under pressure from risk-off flows and the partial US government shutdown, which limited the release of key economic data. Aluminium prices gained further traction after Alcoa announced the closure of its alumina refinery in Australia due to declining bauxite grades.

With the shutdown likely stretching into its fourth week, attention remains on the Senate, which is set to vote on a measure to end the impasse on Monday. If the funding bill is not passed by October 22, the shutdown would become the second-longest in US history. Attention is also turning to the delayed US inflation data, now expected on October 24, as markets seek fresh clues on the Federal Reserve’s policy outlook.

The week ahead is data-heavy, featuring key economic releases from China, UK inflation figures, and flash PMI numbers from major global economies. US PMI readings, in particular, will be closely watched for early signals on economic momentum and labor market health, as further softness may reinforce expectations of rate cuts by the Fed.

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