US Core PCE, Russia-Ukraine peace deal progress to steer commodities next week

Fading rate cut bets coupled with concerns over the Fed’s independence soured investor mood this week. However, a surprisingly dovish final address by the Fed Chair on Friday lifted market sentiment.

Donald Trump continued to ramp up pressure on Fed Governor Lisa Cook to resign over alleged mortgage fraud and intensified calls from his administration for rate cuts. Meanwhile, the FOMC July meeting minutes revealed that officials remain cautious about inflation and the labour market, with most considering it premature to cut interest rates. This set the stage for the dollar to close the week higher following two consecutive weeks of declines and led US equities to end the week lower. The dollar surged to 98.6 amid mostly hawkish remarks by Fed officials and robust Flash PMI numbers. Early estimates show that US business activity picked up steam this month, largely buoyed by the manufacturing sector, which is expanding at the fastest rate in over three years and saw the strongest growth in new orders in 18 months.

However, in his highly anticipated remarks at the Jackson Hole Symposium, Fed Chair Powell signaled that the central bank could begin easing monetary policy next month. He emphasized downside risks to employment and acknowledged that a rate cut might be needed to support the labor market, while stating that the inflationary impact of Trump’s tariffs could prove temporary. This fueled a rally in both US equities and bullion, while the dollar slipped to 97.5.

COMEX gold and silver prices surged to $3423.4 per troy ounce and $39.09 respectively, closing the week 1 percent higher. The rebound marked a sharp recovery from three-week lows of $3353 per troy ounce and $36.96 per troy ounce, hit earlier amid a stronger dollar and fading expectations of a September rate cut.

On the daily chart, MCX SILVER futures witnessed a sharp rally on Friday following a breakout from the triangle pattern. The Supertrend (7,3) indicator has turned positive, while RSI (14) remains above 60, both supporting a bullish outlook. The uptrend is expected to extend into the coming week, with immediate resistance placed at Rs 1,18,400 per kg and the next at Rs 1,21,900. On the downside, initial support is observed at Rs 1,12,600, followed by Rs 1,10,300.

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WTI crude oil traded in a narrow range amid uncertainty surrounding a potential Russia-Ukraine truce and a bigger-than-expected US inventory draw. Peace negotiations between Russia and Ukraine appeared to stall, with Russia launching its largest air attack since July, targeting Western Ukraine, while Ukrainian forces struck an oil refinery in Russia’s Rostov region near the Donbas. Oil prices may remain volatile as Trump threatened Putin with “massive sanctions” if Russia doesn’t agree to a peace deal within two weeks.

LME base metals wrapped up the week on a firmer footing, with aluminium leading the pack. Gains in aluminium were underpinned by expectations of steady Chinese demand and capped domestic production, which could accelerate smelting investments overseas. Still, sentiment across the complex was tempered by the Trump administration’s move to widen 50 percent tariffs on steel and aluminium imports to hundreds of new products, stoking trade-related volatility. Copper, meanwhile, found underlying support from Chinese appetite, evident in a 13 percent rise in Yangshan premiums since mid-August. However, higher imports boosted inventories, easing concerns of near-term tightness.

Now, initial euphoria regarding rate cuts may have eased a bit, as the CME FedWatch tool showed the probability of a 25 bps rate cut falling back to 75 percent after surging to 85 percent following Powell’s remarks. This indicates that markets acknowledge upside risks to inflation. All eyes now turn to the US Core PCE data, which is expected to rise 0.3 percent MoM in July, pushing the annual rate to 2.9 percent from 2.8 percent, further away from the Fed’s 2 percent target. A hotter print could once again lead to recalibration of rate cut expectations. Alongside this, China’s industrial profits, US preliminary GDP, jobless claims, and comments by several FOMC officials will infleunce market moves in the days ahead.

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