Fed uncertainty and gulf tensions to keep commodity markets on edge next week

Despite the inflation surprise, the dollar's gains faded as a selloff in AI and semiconductor stocks triggered a rotation into government bonds, easing Treasury yields. Fed Chair Kevin Warsh refrained from offering fresh policy guidance at the IMF and World Bank meetings in Bangkok, helping ease concerns of consecutive rate hikes. Fed officials continued to send mixed signals. John Williams supported one additional rate hike this year, Austan Goolsbee described the inflation data as discouraging, Beth Hammack warned further tightening may be needed if inflation expectations rise, while Michelle Bowman saw no immediate urgency to act.

Combined with softer labour market data, markets are now pricing roughly a 20 percent chance of a rate hike in October and close to a 90 percent probability in December. US equities ended mixed, with the Dow Jones posting gains while the S&P 500 fell nearly 2 percent and the Nasdaq declined 4.5 percent amid broad weakness in technology shares. Precious metals came under pressure after the stronger-than-expected inflation print.

Spot gold fell to a two-month low of $4,073 per ounce and silver dropped to $55.4 per ounce, its weakest level since July. Both metals later recovered as the dollar retreated toward a two-week low and investors increasingly expected the Fed to leave rates unchanged this month. Gold rebounded to $4,198 an ounce and ultimately settled near $4,165 an ounce, while silver closed around $57 an ounce, down roughly 6 percent for the week as markets balanced expectations of a policy pause against the likelihood of a December rate hike.

Gold futures remain under pressure, trading below the 20-day EMA and Supertrend, indicating a weak near-term trend. Immediate support is placed at Rs 1,45,600 per 10 gram, and a sustained break below this level could drag prices towards Rs 1,43,350. On the upside, resistance is seen at Rs 1,50,000, followed by Rs 1,51,600; a sustained breakout above Rs 1,50,000 could improve the outlook. Crude oil was the week's strongest performer, ending near five-month highs as geopolitical tensions and supply disruptions outweighed demand concerns.

Brent largely traded between $104-107 a barrel, with gains capped after OPEC lowered its 2026 demand growth forecast and the IEA widened its projected demand contraction amid elevated prices and supply constraints. However, Brent surged to settle at $109.86 a barrel on Friday, up 3.7 percent on the day and marking its highest close since May. The rally was driven by mounting supply risks, including attacks on vessels near the Strait of Hormuz, threats to Saudi export infrastructure and Ukrainian strikes on Russia's Ryazan refinery.

Tight diesel markets further supported prices, with inventories remaining critically low ahead of winter. The WTI-Brent spread narrowed from above $12 a barrel, its widest level in 11 years, to around $8 a barrel after a more than 8-million-barrel decline in US crude inventories boosted WTI, which gained nearly 11 percent for the week. Base metals remained under pressure as inflation concerns and weaker risk appetite weighed on demand.

Copper drifted toward $14,300 per tonne despite a mixed supply backdrop. An avalanche at Codelco's El Teniente mine temporarily disrupted operations, although the impacted area accounts for less than 10 percent of the mine's output. Aluminium touched an eight-month low, while zinc fell 3 percent, making it the weakest performer among base metals. Looking ahead, China's third-quarter GDP and industrial production data will be key catalysts for commodity markets.

Strong readings could reinforce confidence in recent stimulus measures and support industrial metals, while weaker figures may deepen concerns over underlying demand. Attention will also turn to flash PMI releases from the US, Eurozone, Germany and the UK, with investors focusing closely on price and employment components for clues on inflation trends. For precious metals, movements in the dollar and Treasury yields are expected to remain the primary drivers.

For copper, a preliminary agreement at Antofagasta's Centinela mine that averted a prolonged strike may lead to a weak start, leaving demand signals from China as the key driver. For crude oil, developments around Hormuz shipping routes, Saudi energy infrastructure and tanker sanctions will remain critical. Additionally, the White House's decision to delay certain Russia-related sanctions could allow more Russian crude to reach global markets, potentially moderating further upside despite ongoing geopolitical risks.