Commodity markets wrapped up May on a strong note, with most risk assets posting gains despite lingering trade policy uncertainty.
US equity benchmarks recorded strong monthly gains in May, with the S&P 500 and Nasdaq posting their best month since November 2023, while the US dollar extended its decline for a fifth consecutive month amid growing trade policy uncertainty. Risk sentiment was also positive on a weekly basis, initially supported by President Trump’s decision to delay a planned 50 percent tariff on EU goods until July 9. Investor confidence received an additional boost after a US trade court blocked Trump’s global tariff agenda. However, sentiment weakened somewhat after the Trump administration appealed the court ruling that had declared the tariffs illegal. Despite stalled US-China trade talks and renewed tariff concerns, US markets still closed the week higher.
On the contrary, gold’s safe haven appeal faded, and COMEX August futures slipped below $3,270 per troy ounce as a US trade court ruling nullified Trump’s flat tariffs, elevated duties on China and others, as well as fentanyl-related tariffs on China, Canada, and Mexico. However, a weaker US dollar and renewed dip-buying interest amid soft US data helped gold trim weekly and monthly losses to 2.4 percent and 1 percent, respectively. The US dollar slipped from a one-week high of 100.5 following the first quarterly GDP contraction in three years, amid weak consumer spending and the steepest drop in corporate profits since 2020. Additionally, jobless claims rose to 240,000, with continuing claims reaching their highest level since November 2021.
The MCX GOLD Futures traded sideways to lower last week. The price maintained its support at the 20 EMA and closed higher. Breaching the previous week's low (Rs 95,213 per troy ounce) may cause prices to fall to test support at Rs 94,000. On the upside, initial resistance is around Rs 97,000, followed by Rs 97,550.
Silver also closed the week lower along with industrial metals, as early gains spurred by a weaker US dollar and optimism following a US trade court ruling against much of President Trump’s tariff plan were short-lived. However, silver closed May with modest gains, and copper saw an uptick of more than 4 percent as declining LME inventories and widening LME cash-to-three-month backwardation underpinned worries about tighter supply.
WTI crude oil prices slipped below $60 per barrel as investors turned cautious ahead of the OPEC+ meeting, amid speculation of a third consecutive production increase. Still, oil closed the month 4 percent higher in a sharp rebound from biggest monthly fall since 2021 in April, amid renewed focus on US-Iran nuclear talks and escalating Russia-Ukraine war. Oil prices are likely to extend declines next week as OPEC+ agreed to yet another super-sized production hike of 4,11,000 barrels a day for July, fuelling concerns of a supply glut.
Markets now turn to the upcoming US labour report for policy signals, following early signs of a rebound in Q2 with modest gains in consumer spending and subdued April inflation. The ECB policy meeting, where a 25 bps rate cut is widely expected, and final PMI data will also be watched.
Still, the spotlight remains on Trump tariffs as White House trade adviser Peter Navarro said that the Trump administration will seek to enact tariffs through other means if it ultimately loses the court fights over its trade policy. While industry-specific tariffs on steel, aluminum, and autos stay in place, the fate of broader duties depends on the ongoing court appeal. Trump’s accusations of China violating the trade truce add another layer of uncertainty for markets.
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