Commodity markets brace for Trump tariff moves in data-light week ahead

WTI crude oil closed the week above $66 a barrel, supported by stronger-than-expected US and Chinese economic data

Surprisingly resilient US labour data, coupled with the passage of President Donald Trump’s massive tax and spending bill, boosted risk sentiment during the week ended July 4.

The US dollar initially slipped to 96.4, its lowest level since February 2022, as traders remained cautious about the economic implications of Trump’s multitrillion-dollar fiscal package and awaited developments on the trade front. However, the greenback rebounded to 97.4, and the S&P 500 and Nasdaq Composite closed the holiday-shortened week at fresh record highs on Thursday, as a solid US NFP report helped ease concerns of a potential economic slowdown despite ongoing tariff tensions.

Following the data, the CME FedWatch Tool showed a jump in the odds of the Fed holding rates at 4.25 percent–4.50 percent in July to 93 percent, up from 76 percent a day earlier. September rate cut chances also dipped to 71 percent. Gold prices dropped to $3,320 per troy ounce on Thursday as investors adjusted their expectations. However, trade uncertainty and concerns over the US' fiscal position after the passage of Trump’s spending bill helped gold recover, ending the week up 1.7 percent at $3,346 per troy ounce. Silver rallied 3 percent, supported further by signs of continued strength in the US economy.

Last week, MCX SILVER futures climbed significantly after breaking above the upper bound of the triangular consolidation on the lower time frame. On the weekly chart, price is holding above the 20 period moving average indicating a bullish bias. The momentum indicator RSI (14) has climbed above the 60 mark on the weekly chart which demonstrates the presence of bulls for the medium term. We expect price to maintain its bullish momentum in the coming week. The initial resistance is observed at Rs 1,11,000 per kg, above which we could witness a parabolic upside in the counter. On the flip side, immediate critical support is now observed at Rs 1,04,000 per kg, below which the bias turns neutral.

On the trade front, tensions intensified. President Trump threatened to impose tariffs of “30 percent or 35 percent” on Japan if a trade deal is not finalised by July 9 deadline. While agreements have been reached with the UK, China, and Vietnam, a deal with India appears imminent, and the European Union may soon announce a basic agreement to avoid new tariffs.

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Kaynat Chainwala

Senior manager - commodity research|Kotak Securities

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WTI crude oil closed the week above $66 a barrel, supported by stronger-than-expected US and Chinese economic data. Gains were modest, however, amid pressure from renewed US tariff threats, an OPEC+ output decision, and a build in US crude inventories. Looking ahead, oil prices may come under pressure as OPEC+ agreed to a larger-than-expected production increase of 5,48,000 barrels per day for August, well above the 4,11,000 bpd added in each of the past three months.

LME base metals posted mixed results for the last week. A modest rebound in China’s manufacturing sector offered some support, but softer services data and a stronger US dollar capped gains. Copper briefly crossed the $10,000 per tonne mark, buoyed by global supply tightness and tariff-induced trade shifts. However, a recovery in LME inventories from two-year lows led to a pullback. Aluminium held near multi-month highs, supported by ongoing concerns over potential bauxite supply disruptions from Guinea.

Market caution may persist as Trump plans to announce tariff notices on 12 countries this Monday (July 7), with some levies potentially reaching up to 70 percent. Most of these tariffs are expected to take effect by August 1. In addition, the US has threatened to impose 17 percent tariffs on European Union agricultural exports, escalating trade tensions just ahead of the deadline, while optimism for deals with Japan and South Korea is fading.

Investors will also closely watch the FOMC’s June minutes. While Fed officials have maintained a cautious tone, citing tariff-driven inflation risks, strong US labour data reinforces their view that there is no immediate need to cut rates.

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