Next week’s Fed meeting could be pivotal, but US-China trade talks will also remain in sharp focus.

Commodities Outlook

It was a bruising week (ended May 2) for commodity bulls, as relentless selling swept through the metals and energy complex. The only bright spot was Natural Gas, which surged by a whopping 13.6 percent on the MCX, bucking the downtrend seen across most major commodities.

Base metals like aluminium (-1.1 percent), copper (-1.7 percent), zinc (-2.4 percent) and silver (-2.5 percent) were hammered after China’s latest PMI numbers came in weaker-than-expected, sparking fears of a hard landing for the world’s second-largest economy. The persistent uncertainties around the US-China trade war added further pressure, as global markets fretted over potential economic decoupling between the two superpowers.

The strengthening US Dollar Index only deepened the pain, pushing commodity prices lower across the board. In bullion and base metals, long liquidation was witnessed both on the COMEX and MCX, reflecting traders’ lack of conviction amid macroeconomic uncertainties.

However, the steepest fall came in crude oil, which plunged 8.8 percent week-on-week on news that OPEC+ plans to raise output. Further commentary from Saudi Arabia, suggesting comfort with lower oil prices, sent shockwaves through the market. At one point, crude prices were down double-digit before recovering slightly after US President Trump hinted at secondary sanctions on countries importing Iranian oil and gas.

Bullion, traditionally seen as a safe haven, failed to hold its ground amid stronger US jobs data. While ADP employment growth disappointed at 62,000 versus the 1,14,000 forecast for April, the Non-Farm Payroll (NFP) report beat expectations at 1,77,000 versus 1,38,000. This unexpected strength in jobs data, alongside steady unemployment at 4.2 percent and slightly weaker wage growth (0.2 percent Vs 0.3 percent), tempered hopes of a Fed rate cut. Consequently, the dollar strengthened, and gold and silver prices slumped as money rotated out of safe-haven assets into equities.

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Anindya Banerjee

Head Commodity and Currency Research|Kotak Securities

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The announcement that the US and China are open to trade negotiations provided some optimism, but scepticism lingers. Market participants remain wary of how much of this is political posturing versus real progress. Our view is that as long as the US adheres to an "America First" strategy, tariffs are unlikely to go away marking a clear move toward de-globalization. This could result in a painful economic decoupling between the two largest economies, potentially setting the stage for global macro volatility in the second half of 2025.

Looking ahead, all eyes will be on the upcoming US Fed meeting. While no rate cut is expected, markets will watch closely for the Fed's stance on inflation risks stemming from tariffs. In the near term, we expect:

• Gold to range between $3,170 and $3,275 per troy ounce

• Silver to fluctuate between $30.60 and $32.75 per ounce

• WTI Crude to remain in a $55–$60 a barrel

• Natural gas to test Rs 325 per kg on MCX, where fresh selling pressure may emerge

• Copper could bounce toward Rs 850 per kg

• Aluminium may follow copper’s trajectory

• Zinc is likely to remain rangebound

As calm returns momentarily to commodity markets, the broader storm of global realignment—economic, geopolitical, and structural—continues to gather on the horizon.

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