Right now, the macro environment is mixed and sends signals in both directions.
On the positive side, the partial easing of U.S.–China tariff tensions and the White House nomination of Kevin Warsh as the next U.S. Federal Reserve Chair have influenced the dollar and overall risk sentiment. almer trade backdrop and clearer policy expectations usually help markets stabilize.
On the other hand, geopolitical risks are still high. Global risk indicators continue to show heightened concerns around interstate tensions and geoeconomic confrontation through 2026. Such uncertainty can keep volatility high in commodity markets—even if spot prices are taking a breather.
Meanwhile, China’s latest manufacturing PMI slipped back into contraction territory in January. This points to softer short-term demand. Still, long-term themes like electrification, electric vehicles, and data center expansion continue to support demand for several metals. –
Bullion: A Positioning Reset, Not a Trend Reversal
Gold and silver were extremely volatile in January. Both hit fresh highs early in the month before a sharp selloff later in January. The key trigger was the nomination of Kevin Warsh for Fed Chair, which pushed the dollar higher and led to quick profit-taking in precious metals. –
Prices recovered in early February as bargain hunters stepped in, showing that the underlying demand for precious metals is still intact. But the episode made it clear that gold and silver remain very sensitive to policy signals and currency movements.Despite the recent turbulence, the long-term bullish case for gold is still strong. Central banks continue to buy heavily, geopolitical risks remain elevated, and expectations of interest rate cuts support the metal. However, as markets adjust to new expectations about the Fed, corrections may become deeper and more frequent
Base Metals: Supply Tightness Meets a Softer China
Base metals like copper, aluminium and nickel rallied strongly into early 2026 due to tight supply conditions and strong demand from energy transition themes. Copper came close to record highs, and other metals firmed as smelter disruptions and policy changes hit output.
Forecasts suggest that the copper market could face a 1-million-ton deficit in 2026. This remains a strong medium-term driver. But in the short term, momentum has slowed. LME inventories grew in January, easing immediate tightness.
China, the world’s largest consumer of base metals, posted a manufacturing PMI of 49.3 in January, indicating contraction. Weak new orders and export demand suggest a cautious near-term outlook. -term outlook.
Trade tensions have eased slightly, with both the U.S. and China adjusting certain tariffs and extending exclusions. This can reduce costs for some industrial inputs. But this is not a full reset of trade relations—policy risks remain.
Energy: Crude Under Pressure, Gas More Constructive
Energy markets have taken different paths. Natural gas prices spiked due to cold weather and strong power demand. Crude oil, however, remained weak because the market is well supplied.
The IEA’s recent report shows global inventories building, and January prices fluctuated mainly due to supply disruptions and geopolitical headlines. The broader message is clear that the supply is growing steadily, and demand growth is modest. This supports the view that crude could stay in a “reset” phase.
Tariff easing plays only a minor role in energy markets, mostly through macro effects. If the dollar strengthens, it could put additional pressure on oil prices in the near term since crude is priced in dollars.
Outlook: A Likely Multi Week Consolidation, Not A Reversal
The commodity outlook points to a multi-week consolidation rather than a major reversal as markets absorb several factors like the Fed succession and its effect on the dollar, limited tariff relief amid ongoing policy uncertainty, China’s weaker PMI, and persistent geopolitical risks. Even with this slowdown, the medium-term outlook remains positive for select commodities. A structural copper deficit, firm natural gas demand, and gold’s value as a geopolitical hedge support long term resilience once the correction stabilizes. Tariff relief offers only modest support,and potentially temporary, while elevated geopolitical tensions continue to boost volatility and safe-haven demand. A steady or stronger dollar could cap near-term gains, but overall conditions suggest a broad reset, rather than the beginning of a downturn.-week consolidation rather than a major reversal as markets absorb several factors-term outlook remains positive for select commodities. A structural copper deficit, firm natural gas demand, and gold’s value as a geopolitical hedge support long-term resilience once the correction stabilizes. Tariff relief offers only modest support and may be temporary, while elevated geopolitical tensions continue to boost volatility and safe-haven demand. A steady or stronger dollar could cap near-term gains, but overall conditions suggest a broad reset, not the start of a downturn.
(The author, Hareesh V, is Head of Commodity Research at Geojit Investments Limited)
(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)
