Market volatility to persist as commodity traders brace for key US data and election jitters

Market volatile

By Kaynat Chainwala, AVP-Commodity Research at Kotak Securities

Markets were choppy this week (ended October 25) driven by uncertainty over the US elections and ongoing tensions in the Middle East.

The US dollar surged to a three-month high of 104.57, marking its fourth consecutive weekly gain. Strong US economic data has raised expectations that the Federal Reserve will take a cautious approach to monetary easing, leaving swap traders less confident about potential rate cuts in the near future. US markets closed mixed. The S&P 500 and Dow Jones dipped after a six-week winning streak, while the Nasdaq soared to an all-time high, buoyed by impressive gains from tech giants ahead of their earnings reports.

COMEX gold surged to a record high of $2,772.60 per ounce, capturing market attention as a safe haven amid the tightly contested race between Vice President Kamala Harris and former President Donald Trump. Adding to gold’s momentum were concerns over the growing US budget deficit and a pullback in the US 10-year Treasury yield to 4.25 percent, its highest since late July. Gold ultimately closed the week 1 percent higher at $2,760.80 per ounce.

Meanwhile, COMEX silver briefly crossed the $35 mark for the first time in 12 years but gains were limited to 2 percent as prices retreated to close below $34 per ounce amid softness in base metals.

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Kaynat Chainwala

Senior manager - commodity research|Kotak Securities

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MCX Gold (December futures) on the daily chart is trading inside a ‘Flag’ chart pattern, a break from which will confirm a continuation of the prior bullish momentum. Also, price has sustained above its 20 period ‘Simple Moving Average’ affirming positive momentum. Price can test its resistance placed at Rs 79,500 per 10 grams, whereas support for the counter is placed at Rs 77,400 below which major support is placed at Rs 77,000.

LME markets ended the week mixed. Investors are eagerly awaiting additional stimulus from China, but a stronger dollar and the IMF’s downward revision in growth forecasts for China capped potential gains. LME zinc experienced wild fluctuations before settling with marginal gains, as easing inventory arrivals significantly reduced backwardation from its highest level since September 2022. Earlier in the week, premium surged to $58 per tonne, pushing prices to a 20-month high of $3,284 per tonne.

WTI crude oil prices rebounded sharply on Friday, closing the week with a 3.6 percent increase as market participants are on edge due to escalating hostilities between Israel and Iran, which could lead to a broader regional conflict. Oil price moves ahead will depend on discussions between Israeli and American representatives scheduled to return to Qatar over the weekend to revive cease-fire talks.

Looking ahead, traders may remain cautious in anticipation of the September Core PCE and labour market reports, the last key data points before the Fed's next policy decision on November 8. US and China PMI numbers will also be closely monitored. The Bank of Japan is expected to maintain its current stance, as Governor Kazuo Ueda has indicated that interest rates will not be hiked next week. Overall, investors should brace for continued volatility driven by potentially pivotal market developments in the coming weeks.

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