Commodities to remain volatile as Trump's Tariffs ignite recession fears

It was a brutal week (ended April 4) for global markets as Trump’s tariffs fueled recession fears, sending traders into a frenzy. A risk-off sentiment swept through the markets on Friday, capping a challenging week sparked by growing concerns of a full-blown trade war between the world’s two largest economies as China’s retaliatory measures and export controls on rare earths further escalated the trade standoff.

Commodities were hit hard, with copper and crude oil falling more than 5 percent on Friday alone, and closing the week over 10 percent lower. Gold and silver, too, suffered, dragged down by the broader market selloff.

On the weekly chart, the MCX Gold futures have formed a Bearish Engulfing candlestick pattern, suggesting a negative bias. Additionally, the price closed below the 20 EMA and Supertrend (7,3) on the daily chart, supporting a bearish bias. Although we anticipate that the price may continue its downward trend over the next week, it can find initial support at Rs 86,200 per 10 gram and then Rs 84800. On the other side, Rs 90,000 and Rs 91,500 are the first points of resistance.

Silver, in particular, emerged as the worst performer in the non-agri commodities space, plunging more than 14 percent, while copper saw its worst weekly loss since September 2022 amid rising concerns about weakening global demand and an industrial slowdown. Trump’s tariffs, which imposed a 10 percent duty on imports, with significantly higher rates on key partners like China (54 percent) and the EU (20 percent), rattled investor confidence.

The US stock markets followed suit, suffering their worst week since the onset of the Covid-19 crisis. Fears about the tariffs and their potential to stifle global growth weighed heavily on investor sentiment. Concerns about a global trade war intensified after reciprocal tariffs were announced by the Trump administration on April 2, prompting both China and the EU to vow retaliation. The market selloff extended into Friday, leading to 8-10 percent weekly losses across Wall Street’s three major indices, after China’s Commerce Ministry announced it would impose a 34 percent tariff on all US products, matching the tariff rate imposed by President Trump earlier that week on Chinese imports.

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Meanwhile, the dollar index saw a recovery on Friday after its worst day since November 2022, hitting a five-month low of 101.26. Dollar closed near 103 levels, capping weekly decline to just 1 percent, as Fed Chair Jerome Powell acknowledged larger-than-expected US tariffs had increased the risk of higher inflation and slower growth and signaled that policymakers wouldn’t rush to offset the impact.

The much-anticipated US jobs report presented a mixed picture. Non-farm payrolls exceeded expectations, adding 228,000 jobs in March, but the unemployment rate ticked up slightly to 4.2 percent from 4.1 percent. Traders are now eyeing US inflation numbers, consumer sentiment, and inflation expectations, as a higher-than-expected inflation number could provide additional support to the dollar with Fed Chair already implying a cautious tone on future easing. However, its impact on global markets may not be as significant, as concerns over the escalating trade war rhetoric continue to dominate, with fears of further disruptions on the horizon.

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