US jobs data and trade deals to drive commodities in holiday-shortened week

Commodities Outlook

Optimism over the US-China trade truce, a fragile but holding Israel-Iran ceasefire, and growing expectations of a Federal Reserve rate cut have collectively lifted market sentiment last week ended June 27.

The US dollar slipped to its lowest level since March 2022, following reports that President Donald Trump may announce a replacement for Fed Chair Jerome Powell as early as September or October. Such a move could increase the likelihood of rate cuts. The greenback is now on track for its sixth straight monthly decline, weighed down by persistent uncertainty surrounding US trade policy and economic growth.

US equities saw brief volatility after Trump announced the immediate suspension of all trade talks with Canada in response to its digital services tax on American tech firms. However, the market quickly rebounded, with the S&P 500 and Nasdaq both closing at record highs on Friday.

COMEX gold slipped below $3,300 per troy ounce and closed the week 3 percent lower, marking a second consecutive weekly decline, as easing geopolitical and trade tensions reduced safe-haven demand. Additionally, Fed Chair Jerome Powell, in his congressional testimony, emphasized that the central bank is not rushing to cut interest rates, although he acknowledged that easing could come sooner if inflation remains subdued.

Last Friday, MCX Gold futures declined considerably after breaking below the ascending trendline. The price closed negative for the second week in a row. The supertrend (7,3) has turned negative, and the price is trading below the 20EMA, indicating a bearish bias. We expect price to maintain its bearish momentum in the coming week, but it may find initial support near Rs 93,500 per 10 grams, followed by Rs 91,950. On the flip side, the initial resistance is at Rs 97,650, followed by Rs 98,850.

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Kaynat Chainwala

Senior manager - commodity research|Kotak Securities

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WTI crude oil prices dropped 12 percent for the last week, biggest weekly decline since 2023, as prices retreated from a five-month high of $78.4 per barrel, as the Israel-Iran ceasefire eased potential supply disruption concerns in the region. However, prices steadied above $65 per barrel, supported by a sharp drop in US crude and product inventories and Trump’s renewed commitment to the “maximum pressure” campaign on Iranian oil exports. This stance reversed earlier expectations of sanctions relief, following his comments suggesting China might resume Iranian oil purchases. Oil prices were also buoyed by the US-China trade truce and hopes of new stimulus measures from China. Prices may remain rangebound ahead of the OPEC+ meeting on July 6 and key US trade decisions due by the July 9 deadline.

LME base metals extended gains for another week, with all major metals ending higher amid persistent supply tightness and improved investor sentiment. Zinc led the rally, rising over 5 percent to $2,779 per tonne, driven by declining SHFE inventories and broader supply constraints. Copper also drew attention, climbing 2.5 percent to $9,878 per tonne, highest since April, amid one of the sharpest backwardations on the LME since the 2021 squeeze. This was fueled by a 63 percent year-to-date drop in LME inventories and a redirection of stockpiles to the US ahead of potential import tariffs.

Looking ahead, markets will be closely watching a packed week of macroeconomic data and central bank commentary. Final PMI readings from major global economies will be closely watched but US jobs report will be a key focus, as softer labour market data could strengthen expectations for an early rate cut.

In a positive development for trade relations, China has approved rare earth exports to the US, in response to the US roll back of several restrictive measures on the mainland nation. Market attention now turns to potential trade deals with 18 of the US’ key trading partners, which could be finalised by the September 1 Labor Day holiday, suggesting flexibility beyond the initial July 9 deadline.

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