Dollar and commodity trend hinges on US PCE number next week

Commodities Outlook

Concerns about a slowing economy and persistent inflation in the US significantly weighed on commodity market sentiment. The dollar fluctuated between gains and losses before closing flat around 106.7, recovering from a two-month low. This rebound was driven by hawkish comments from Federal Reserve officials, but was offset by weak US economic data released on Friday. The US consumer sentiment index fell to a 15-month low, while long-term inflation expectations surged to a 30-year high amid growing concerns that President Donald Trump’s broad and steep tariffs could exacerbate inflation. These renewed worries about stagflation led to sharp losses on Wall Street, with major indices experiencing their steepest one-day declines since December.

Comex gold extended its winning streak, marking its eighth consecutive weekly gain and rising to a record high of $2,973.40 per ounce, driven by market uncertainty surrounding Trump’s proposed reciprocal tariffs and broader economic concerns. However, gold pulled back from its peak after the release of FOMC minutes, which revealed that Fed officials expect to keep rate cuts on hold due to upside risks to the inflation outlook, amid potential impacts from changes in trade and immigration policies.

WTI crude oil extended its losing streak for a fifth consecutive week, settling below $70.30 per barrel, its lowest level since December. The decline was driven by rising US inventories, the possibility of increased oil flows from Iraq, and the potential easing of sanctions on Russian oil. Earlier in the week, prices briefly surged above $72 per barrel due to supply disruptions caused by a drone attack on a key Russian oil pipeline.

Meanwhile, Nymex natural gas futures rallied 14% to a two-year high of $4.44/mmBtu buoyed by forecasts of frigid temperatures, larger-than-expected storage withdrawals, and record-high US LNG export flows.

MCX Natural Gas Futures rose significantly last week, reaching a high of Rs 388.6 since the previous year. Price also saw its largest weekly gain (14.86%) in two months. Price is above Supertrend (7,3) and 20 EMA indicating bullish bias. We expect price to continue its bullish move next week but may find initial resistance at Rs 400 followed by Rs 410. On the flipside initial support lies at Rs 350 followed by Rs 335.

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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, buoyed by a softer dollar and renewed optimism surrounding a US-China trade deal. The EU’s decision to phase in a ban on Russian imports kept supply concerns alive, which helped support gains in aluminum.

A series of important US economic reports are set to be released, including the US CB Consumer Confidence, Preliminary GDP, and housing market indicators. However, markets will likely focus on the US PCE index, the Federal Reserve’s preferred inflation gauge, for clues about the central bank’s future monetary policy. If inflation proves hotter-than-expected, it may prompt the Fed to maintain its cautious stance. Additionally, short-term movements in oil prices will depend on whether the US increases or reduces sanctions, a decision likely influenced by Russia’s willingness to negotiate an end to its conflict with Ukraine.

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