Gold set to gain further on trade jitters and US fiscal concerns; oil and metals face selling pressure

Commodities Outlook

Swelling US debt burden and geopolitical tensions kept global risk appetite subdued, with renewed tariff threats from Trump on Friday further intensifying market anxiety.

Moody’s downgrade of the US credit rating from “Aaa” to “Aa1,” citing a ballooning federal deficit and a $36 trillion national debt, pressured the US dollar below the 100 mark as it underscored growing concerns over the country's economic outlook and fiscal sustainability.

Despite early challenges, the House of Representatives passed Trump’s expansive tax and spending bill, providing temporary relief to US equities and the dollar. However, markets took another hit after Trump proposed imposing 50 percent tariffs on imports from the European Union starting June 1 and floated a 25 percent tariff on Apple iPhones produced outside the US. These remarks triggered sharp declines, with the US dollar and the three major stock indexes posting weekly losses of more than 2 percent.

Gold rallied more than 5 percent, reaching a two-week high of $3,366.5 per ounce, driven by a weaker dollar and persistent safe-haven demand. The rally was further supported by a surge in Chinese gold imports despite high prices and increased geopolitical tensions in the Middle East. The metal spiked sharply on Friday following Trump’s latest tariff threats targeting the EU and Apple.

MCX Gold Futures opened a gap up last Monday and rose throughout the week, closing at the second highest weekly level (Rs 96,400 per 10 gram). The price on the weekly chart is above the 20 EMA and the Supertrend (7,3), indicating a positive bias. Price has managed to close above the ascending trend line, indicating a bullish bias. Price may continue its positive trend in the coming week, but may encounter initial resistance at Rs 97,600, which bulls may break and sustain above, allowing prices to approach all-time highs. On the other side, initial support is at Rs 94,000, followed by Rs 92,800.

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Kaynat Chainwala

Senior manager - commodity research|Kotak Securities

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Silver also rose by 3 percent, while base metals ended the week mixed due to concerns about the strength of the US economy and ongoing global trade tensions. Copper gained on the back of tight refined supply and record Chinese concentrate imports, whereas aluminum declined due to a sharp rise in LME inventories and higher production in China.

WTI crude oil was highly volatile, rising to $64.19 per barrel on fears of supply disruptions after reports of a possible Israeli strike on Iranian nuclear sites. Prices then fell to $60.3 on reports that OPEC+ may implement a third consecutive bumper production increase and US crude inventories rose for a second week. Oil recovered to $61.8 on Friday amid renewed focus on US-Iran nuclear talks, following Tehran’s warning that negotiations would not progress if Washington maintained its zero-enrichment stance. Signs of progress in the fifth round of talks held in Rome may trigger fresh selling next week.

On the data front, FOMC meeting minutes, jobless claims, and preliminary GDP estimates will be closely watched. However, core PCE, the Fed’s preferred inflation gauge, is most keenly awaited, as Fed officials continue to flag concerns about inflation risks, particularly those stemming from trade-related tariffs.

Trump’s renewed tariff threats will remain center stage, keeping risk appetite subdued. His warnings of potential tariffs on Apple, Samsung, and other tech firms by the end of June, unless devices sold in the US are manufactured domestically, combined with stalled US-EU trade talks, fuel fresh uncertainty in an already volatile market.

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