US Jobs Report and Trade Policy to Set Tone for Commodities in Holiday-Shortened Week
Rate Cut Hopes and Trade Truce Boost Sentiment, While Gold and Oil Face Volatility
Commodities Outlook: Navigating a Volatile Week Ahead
Market Recap and Shifting Sentiment
Optimism surrounding the US-China trade truce, a tentative Israel-Iran ceasefire, and growing anticipation of a Federal Reserve rate cut buoyed market sentiment last week, which ended on June 27.
- The US dollar weakened, falling to its lowest level since March 2022, as reports circulated that President Donald Trump might soon replace Fed Chair Jerome Powell—an event that could accelerate rate cut expectations.
- Persistent uncertainty in US trade policy and moderate economic growth pushed the greenback to its sixth consecutive monthly decline.
US Equities and Trade Tensions
US stock markets saw temporary volatility after President Trump suspended all trade talks with Canada over its digital services tax on American tech firms.
- Despite this, both the S&P 500 and Nasdaq finished the week at record highs, reflecting underlying resilience in equity markets.
Gold and Silver: Easing Tensions Dampen Safe-Haven Appeal
COMEX gold dipped below $3,300 per troy ounce, closing 3% lower for the week and extending its losses for a second consecutive week.
- Diminished geopolitical and trade risks led to reduced safe-haven demand.
- In his congressional testimony, Fed Chair Jerome Powell indicated that while the central bank isn’t rushing to cut rates, monetary easing could happen sooner if inflation remains subdued.
- MCX Gold futures closed lower, with technical indicators signaling continued bearish momentum.
- Support: Rs 93,500 and Rs 91,950 per 10 grams
- Resistance: Rs 97,650 and Rs 98,850
Oil: Supply Relief and Inventory Data Trigger Sharp Correction
WTI crude oil experienced its steepest weekly drop since 2023, losing 12% after retreating from a five-month high of $78.4 per barrel.
- The Israel-Iran ceasefire eased regional supply concerns, but oil found a floor above $65 per barrel, supported by a notable decline in US inventories and Trump’s hardline stance on Iranian oil exports.
- Hopes for fresh China stimulus and the US-China trade truce lent further support.
- Oil prices are expected to remain rangebound ahead of the OPEC+ meeting on July 6 and pivotal US trade decisions by the July 9 deadline.
Base Metals: Supply Constraints Drive Rally
LME base metals finished higher across the board on supply tightness and improving risk appetite.
- Zinc surged over 5% to $2,779 per tonne, lifted by shrinking inventories and broad supply constraints.
- Copper rose 2.5% to $9,878 per tonne, the highest since April, as LME inventories dropped 63% YTD and supplies were redirected to the US ahead of potential tariffs.
Key Events to Watch This Week
- US Jobs Data: The upcoming labor report is crucial, as weaker employment numbers could reinforce rate cut bets.
- Markets are also monitoring final PMI readings from major economies.
- US Trade Deals: China’s approval of rare earth exports to the US, following the rollback of some US restrictions, marks a positive step in trade relations.
- Trade deals with 18 key US partners may be finalized by Labor Day (September 1), providing a possible extension to the original July 9 deadline.
Outlook Summary
- Commodities markets are poised for another volatile week, with direction hinging on US macroeconomic data and the evolving global trade landscape.
- Gold and oil remain especially sensitive to rate cut expectations and geopolitical headlines, while base metals could extend gains on persistent supply shortages.
- Traders should prepare for sharp moves around US jobs data and updates on trade negotiations, as these will shape both sentiment and pricing in the days ahead.
Keep monitoring for timely updates as pivotal data releases and policy shifts unfold through the holiday-shortened week.
