Commodities on edge ahead of Fed chair Powell's remarks and looming tariffs

By Kaynat Chainwala, AVP Commodity Research at Kotak Securities

Risk appetite was supported early in the week (ended July 18) by signs of US economic resilience, but sentiment turned cautious toward the end amid renewed tariff threats and the feud between US President Donald Trump and Federal Reserve chairman Jerome Powell.

The US dollar initially slipped to a weekly low of 97.71 after reports that Trump was considering firing Powell. However, Trump later downplayed the idea, helping the dollar rebound. The greenback extended gains to 98.95, while the S&P 500 and Nasdaq Composite closed at record highs on Thursday, supported by better-than-expected retail sales and jobs data. However, both the dollar and equity indices trimmed gains Friday as reports emerged that Trump is pushing for a 15 to 20 percent minimum tariff on all EU goods and remains firm on a 25 percent auto import duty despite the bloc offering to remove its 10 percent tariff on US car exports if the US agreed to reduce its own tariffs below 20 percent.

Gold remained rangebound, while silver posted a 1.7 percent weekly decline, pressured by dollar strength, Fed-related uncertainty, and tariff risks. Gold briefly surged above $3385 per ounce on safe-haven demand after speculation of Powell’s dismissal but quickly retreated to $3326 once Trump denied. Gold closed above $3355 per ounce with 0.4 percent drop, as markets balanced trade tensions against mixed US data.

MCX Silver September futures reached a weekly high (Rs 1,15,136) before falling quickly on Monday, forming a Shooting Star candlestick pattern on the daily chart. Prices continued to fall on Tuesday after breaking the low of the Shooting Star candlestick pattern. However, the price formed a Doji on Wednesday, followed by a Hammer on Thursday, resulting in an upward advance on Friday.

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Silver price is trading above the Supertrend (7,3) and 20 EMA, indicating that the positive short-term trend is still intact. We expect price to continue its bullish trend in the coming week, although it may encounter initial resistance at Rs 1,15,136 per kg, which if broken and sustained bulls may push price higher to Rs 1,17,850. On the other hand, Rs 1,10,750 serves as the initial support, followed by Rs 1,09,000.

LME base metals closed higher after a volatile week, supported by positive macro signals and hopes of Chinese stimulus. Zinc led gains, rising over 3 percent to settle at $2818.50 per tonne, driven by smelter output cuts tightening supply. Aluminium and copper rose more than 2 percent and 1 percent respectively, helped by stimulus expectations ahead of China’s Politburo meeting and strong US data.

WTI crude oil briefly hit a three-week high of $69.65 per barrel on fears of US sanctions on Russian energy exports. Prices fell below $66 after Trump opted against immediate action, instead giving Moscow a 50-day deadline to end the war in Ukraine. Losses were limited by strong summer demand, upbeat Chinese data, and OPEC’s positive outlook for the second half of 2025.

Oil bounced to $68.96 per barrel on Friday following new EU and UK sanctions on Russia. However, gains were short-lived as the market viewed the sanctions impact as limited without US backing. Oil is expected to stay rangebound, supported by firm near-term demand, as reflected by prompt spreads in backwardation over $1 per barrel.

With just weeks remaining before Trump’s proposed 30 percent tariff on most EU imports takes effect, his hardened stance raises the risk of a transatlantic trade dispute that could drive up consumer prices on both sides. This uncertainty could further delay rate cuts, with the probability of a 25-basis-point cut in September already down to just 50 percent.

In the data-light week ahead, market focus will be on Fed Chair Powell’s remarks for guidance ahead of the FOMC rate decision. Traders will also closely watch China’s Politburo meeting, expected by month-end, for signals on the country’s economic policy trajectory for the rest of the year.

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