US jobs data and Trump’s tariff vow to keep commodity markets on high alert next week

Commodities Outlook

By Kaynat Chainwala, AVP-Commodity Research at Kotak Securities

Trump’s reiteration of sweeping tariffs kept traders on edge this week ended January 31.

Meanwhile, the dollar, which initially slipped below 107 due to mixed US data and ahead of the FOMC statement, rebounded after the Fed maintained its target range at 4.25% to 4.50%, with Chair Jerome Powell indicating that the central bank requires real progress on inflation or signs of weakness in the labour market before adjusting rates.

US equities started the week on a weaker note after concerns over future energy demand for data centers were raised by Chinese startup DeepSeek’s development of a low-cost, energy-efficient AI model. Following volatile swings throughout the week, US stocks closed lower as the Trump administration reaffirmed plans to impose tariffs on Mexico, Canada, and China starting February 1, leading to a late-session sell-off that erased earlier gains.

COMEX Gold extended its rally, gaining 2% for the week to settle at $2,835 per troy ounce, after hitting a record high above $2,862.9 per troy ounce. Safe-haven demand surged amid escalating trade war fears, raising concerns of global retaliation. While profit-taking and a stronger dollar briefly pressured prices, gold remained resilient, supported by monetary policy easing from major central banks and ongoing economic uncertainty. Domestically, MCX gold April futures surged to a record high of Rs 83,360 per 10 grams during the volatile budget session, but closed near Rs 82,300 as the government decided to keep the import duty unchanged.

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MCX GOLD April futures (back adjusted) rallied sharply last week after breaking above previous swing high of Rs 80,874 to register all-time high of Rs 83,360 (on February 1, 2025). The price closed positively for the sixth week in a row. Furthermore, the price saw the highest weekly gain in two months (2.48%). We estimate price to maintain its upward trend in the following week, potentially testing the Rs 85,350 mark. On the flipside initial support lies at Rs 80,650 followed by Rs 79,450.

WTI crude posted its second consecutive weekly loss, closing at $72.53 per barrel after dipping to a three-week low of $71.94 per barrel, weighed down by the dollar rebound and a massive surge in US crude inventories, which reached a two-month high of 415.1 million barrels. A brief rally above $74 per barrel, driven by supply disruptions in Libya, quickly faded as operations resumed, while weaker US GDP data and a stronger dollar further dampened sentiment.

Additionally, the resumption of Russian crude exports from the Baltic port of Ust-Luga eased supply concerns. Oil prices could see some recovery next week, following President Trump’s confirmation, after-market on Friday, that the US would impose tariffs on crude oil imports from Canada and Mexico—two of the largest crude oil exporters to the US—which could result in supply disruptions. However, Trump also suggested that tariffs on Canadian oil could be reduced to 10%, down from the initially proposed 25%.

LME base metals posted a weekly decline as escalating US tariff threats and a stronger dollar weighed on market sentiment. Trump’s plan to impose 25% tariffs on Canadian and Mexican goods, including aluminum and copper, heightened trade war concerns, while uncertainty regarding the tariff timeline for Chinese imports added to market caution. Zinc fell to near six-month lows, while copper slipped to a two-week low, influenced by weak Chinese manufacturing data and subdued Lunar New Year trading. Aluminum saw a temporary rebound, driven by EU proposals to sanction Russian aluminum imports.

Markets are now focused on the upcoming US jobs report, particularly given Powell’s emphasis that future rate decisions will remain data-dependent. Fed’s preferred inflation gauge recently came in well above the central bank’s 2% target. This suggests the Fed may maintain its pause on rate cuts for the foreseeable future. A strong jobs report could reinforce concerns about inflationary pressures which is already compounded by Trump’s trade and immigration policies might.

In addition, the Bank of England is widely expected to announce a 25-basis-point rate cut, while final PMI numbers will provide further insights into economic activity.

Nevertheless, Trump will likely continue to dominate market sentiment as he plans to enact sweeping trade levies, not just on China, Canada, and Mexico, but also on other targets, including the EU, keeping investors nervous.

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