US jobs data in focus this week as policy reset fuels commodity volatility

Commodities outlook this week

• Further downside pressure on precious metals may emerge early in the week
• Markets to prioritize the US jobs report for clues on timing of next Federal Reserve rate cut
• Bank of England, European Central Bank to be in focus

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Markets endured sharp volatility last week (ended on January 30) on US shutdown risks and President Trump’s Fed chair pick, with commodity markets experiencing especially violent price swings.

The US dollar initially slipped to a four-year low near 95.5 earlier in the week, weighed down by President Trump’s dismissal of dollar weakness, comments that the currency’s value remains strong, and speculation around possible yen intervention involving the US. However, Treasury Secretary Scott Bessent’s dismissal of coordinated currency intervention, rising US Treasury yields, and hotter-than-expected PPI data helped the greenback recover.

The major upside catalyst came on Friday after the Trump administration nominated Kevin Warsh, widely regarded as an inflation hawk, as the next Federal Reserve Chair, hurt rate-cut expectations, pushing the dollar index above 97 and trimming its weekly losses to just 0.5% and weighing on US equities.

Precious metals witnessed an exceptionally brutal correction. COMEX gold and silver posted their steepest single-day declines since 1980 on Friday, settling at $4,713.9 per troy ounce and $78.53 per ounce, respectively. The sell-off followed an extraordinary rally, with gold hitting a fresh all-time high of $5,626 on Thursday and silver peaking at $121.78, supported by a weaker dollar and persistent geopolitical tensions. Silver saw a deeper correction due to its higher volatility, greater exposure to industrial demand, and potentially from the CME’s margin hike announced on Wednesday (January 28).

The sharp rebound in the US dollar and the shift toward a more hawkish Fed outlook accelerated profit-taking across the metals complex including base metals.

A delayed LME opening due to a potential technical issue further added to trader anxiety. Copper ended the week marginally higher above $13,150 per tonne after briefly touching a record high of $14,528 per tonne earlier driven by strong demand for real assets amid escalating geopolitical risks, renewed US–Iran tensions, and persistent trade uncertainty. Aluminium and lead closed with marginal losses, while zinc outperformed with weekly gains of 4.4%.

In contrast, the energy complex stood out as the top performer. WTI crude hovered near six-month highs before closing above $65 per barrel on Friday, as risks of US military action and possible Iranian retaliation, particularly affecting shipments through the Strait of Hormuz, which accounts for roughly one-fifth of global crude flows, kept risk premiums elevated. Oil prices may remain supported as markets track US–Iran tensions, even as President Trump suggested Iran may seek negotiations rather than confrontation, while Tehran reiterated that its missile defense systems would “never” be part of any deal.

MCX Crude oil futures witnessed the gains of more than 6% throughout the recent week. Price has breached out of a base after breaking above the symmetrical triangle on weekly chart. The fourth consecutive weekly gains confirm the bullish stance in the counter. On the daily chart, price has been continuously holding above the 100 EMA and other medium term averages suggesting that the short-term bullish bias remains intact.

As long as MCX Crude oil futures price stays above the immediate support of Rs 5,600 per barrel, it could move higher in the coming week toward the initial resistance at Rs 6,300 per barrel. A breakout and sustained trade above this level could accelerate the momentum towards Rs 6,800 and further towards Rs 7,300. However, a break below Rs 5,600 could pause the current momentum and send the counter in a sideways bias.

Natural gas also bucked the broader commodity sell-off. NYMEX and MCX gas futures surged more than 10% on Friday, taking weekly gains to over 20%, driven by colder-than-expected weather forecasts for early February that could lead to further inventory draws.

During India’s Union Budget session on Sunday, selling pressure intensified on MCX, with gold and silver hitting lower circuits and sliding nearly 9% intraday, compounding Friday’s sharp losses of 17% in gold and 27% in silver. Gold subsequently recovered sharply and erased most of its losses, while silver continued to lag. Since customs duty rates on gold and silver imports were left unchanged in the budget, the latter half of the session saw limited reaction.

Looking ahead, further downside pressure on precious metals may emerge early in the week as higher CME margins come into effect on Monday, February 2. Markets will prioritize the US jobs report for clues on the timing of the next Federal Reserve rate cut, with current expectations pricing out any easing until Jerome Powell’s term ends in May. Additionally, policy decisions from the Bank of England and the European Central Bank will be in focus, though both are widely expected to remain on hold. The impact of the partial US government shutdown that began on January 31 is currently seen as limited.