As the countdown to Donald Trump’s inauguration approaches, nations across the globe are bracing for potential economic and trade disruptions. China finds itself in the crosshairs of these developments, grappling with the spectre of economic decoupling should Trump’s agenda of hardline protectionism through his "America First" policy come to fruition. Unlike 2017, the landscape has dramatically shifted: the US has stretched its fiscal lever to its limits, while China appears to be exhausting traditional mechanisms to sustain growth through fiscal and monetary interventions.
Last week ending December 13, Chinese leaders made their most dovish policy announcement in over a decade, signalling a readiness to deploy extensive stimulus measures to counteract the anticipated impact of US trade tariffs on 2025 economic growth. Following a Politburo meeting, officials pledged to adopt an “appropriately loose” monetary policy and implement “more proactive” fiscal measures. For over two decades, both the Western bloc and its economic partners—China and West Asia—have heavily relied on debt-driven growth strategies. However, as West Asia moves away from petro-dollar dependencies and China seeks new growth models beyond mass production for export, the global economy stands on the brink of a new socio-economic era.
The global commodity markets are likely to experience heightened volatility as the world pivots from a singular fiat reserve currency system dominated by the US dollar to a potential commodity-backed, multi-currency framework in a multipolar world. This marks a reversal of the dollarisation phase that began in the 1970s when the dollar was decoupled from gold. A global monetary system reset of this magnitude could lead to protracted volatility across commodities, goods, services, financial assets, and digital assets. It is a time for markets and economies to prepare for substantial change.
Turning to last week’s commodity price movements, divergent trends were observed across segments. Silver and gold moved in opposite directions, with silver tracking copper lower after key technical levels were breached. This decline followed the release of US CPI data and dovish commentary from the European Central Bank (ECB), which cut rates by 25 basis points. Despite China’s optimistic policy announcements, copper prices failed to respond positively, dragging silver down with it. However, silver may recover in the coming week as traders anticipate a Federal Reserve rate cut of 25 basis points, bringing rates down to 4.50 percent.
On the Multi Commodity Exchange (MCX), silver has strong support levels near Rs 90,000 per kg and Rs 89,000. In the spot market, key support lies at $30.20 and $29.60 per ounce. Copper’s downtrend may persist, but prices are expected to find solid support at Rs 800-Rs 802 per kilogram. Gold, meanwhile, has demonstrated resilience, buoyed by sustained central bank and investment demand. On the MCX, gold has strong support between Rs 76,200 per 10 gram and Rs 76,400, and buying activity is likely to emerge at these levels.
Base metals like aluminium and zinc experienced mild appreciation last week, driven by supply disruptions. Looking ahead, both metals are poised for further gains. Aluminium prices could rise to Rs 246 per kilogram, while zinc could reach Rs 294. Supply constraints remain the primary driver behind this upward trend.
In the energy sector, crude oil prices surged by 5.4 percent, supported by OPEC+ deferring output increases and the looming threat of additional sanctions on Iran. Crude oil remains rangebound between Rs 5,650-Rs 5,700 per barrel on the lower end and Rs 6,150-Rs 6,200 on the higher end. Volatility in natural gas prices also remains elevated, driven by shifting winter weather patterns. On the MCX, natural gas holds a bullish outlook as long as support at Rs 250 remains intact, with a near-term target of Rs 305.
As the global economic and geopolitical landscape evolves, commodities are set to experience unprecedented volatility. Investors and market participants must stay vigilant and adapt to this rapidly changing environment. The convergence of monetary policy shifts, geopolitical tensions, and structural changes in global trade underscores the need for a strategic approach to navigate the challenges and opportunities ahead.
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