Commodity markets brace for volatility amid US tariffs and economic uncertainty

Commodities Outlook for next week

Trump’s sweeping tariffs and disappointing US jobs data, which hinted at a cooling labour market, rattled markets on Friday.

Wall Street was jolted, and the US dollar tumbled after the US non-farm payrolls report showed just 73,000 jobs added in July, well below the 1,04,000 expected, with prior months revised sharply lower, bringing total employment growth between May and July to just 1,06,000 jobs. Wage growth is rising 0.3% alongside an uptick in unemployment to 4.2%. Coupled with Trump’s new tariffs of 10% to 41% on imports from over 70 countries, the data fueled fears of a broader economic slowdown.

Weak jobs print sharply increased odds of rate cuts, with markets now pricing in an 80% chance of a rate cut, up from under 60% before the jobs data. The US dollar responded sharply, dropping from above the 100 level to 98.6 by Friday’s close, while gold rebounded to end the week above $3,400 per troy ounce, up nearly 2%. Silver pared its weekly losses to 3.7%, having recovered from steeper declines earlier in the week. Notably, Comex Gold August futures had earlier touched a one-month low of $3,263.9 per troy ounce after the Fed held rates steady for a fifth straight meeting and Chair Jerome Powell reiterated the central bank is in no rush to cut rates.

MCX GOLD futures exhibited a sharp upward movement on Friday after finding support at the ascending trendline, resulting in the formation of a double bottom pattern. The Supertrend indicator (7,3) has turned positive, and the price has closed above the 20-period EMA, both of which indicate a strengthening bullish bias. Looking ahead, the price is expected to maintain its upward trajectory in the coming week. However, initial resistance is anticipated near Rs 1,00,900 per 10 grams, with the next resistance level around Rs 101,900. On the downside, immediate support is seen at Rs 98,800, followed by a lower support level at RS 98,000.

WTI crude oil briefly surged above $70 a barrel for the first time since late June, supported by optimism over potential US trade deals, escalating sanctions on countries importing Russian oil, and the most extensive Iran-related sanctions package since 2018. However, Friday's weak US jobs data and speculation about a possible OPEC+ output hike led to a sharp pullback to $67.05 per barrel, trimming weekly gains to 3%. Crude could trade in a range as the impact of a possible 548,000 bpd OPEC+ supply increase in September might be offset by Trump’s threat of steep tariffs on China if it continues purchasing Russian oil, as well as renewed maximum pressure on Iran.

LME base metals ended the week on a weaker note, weighed down by global trade uncertainty and fading hopes of major fiscal stimulus from China. Zinc led losses, falling over 3% to $2,727 per tonne, followed closely by aluminium, which dropped nearly 3% to $2,566 per tonne. Copper, however, saw one of its most dramatic reversals in recent history. In a surprise move, President Trump exempted refined copper, cathodes, ores, and concentrates from the looming 50% tariffs, triggering a massive selloff on Comex.

Copper prices plummeted over 20% in a single session, as the exemption largely erased a record premium of over $2,500 per tonne between US and LME prices. This sudden shift dismantled the arbitrage trade that had driven a wave of copper shipments into the U.S. With copper shipments now redirecting toward Asia and Europe, inventories at LME warehouses are beginning to swell, likely keeping copper prices under pressure in the near term.

With a relatively light economic calendar next week, investors will turn their attention to upcoming speeches from several Federal Reserve officials for any shift in future policy outlook, especially after Friday’s weak jobs data shook confidence in the Fed’s “solid” labour market narrative. More critically, the looming August 7 tariff hikes threaten to reignite global trade war fears just as signs of US economic weakness are emerging, leaving markets bracing for renewed turbulence.

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