US tariff impact on commodities: Copper plunges nearly 2%, gold rebounds

New Delhi: Commodity prices witnessed sharp swings last week, with base metal copper dropping nearly 2 per cent while gold gained over 1 per cent after US President Donald Trump imposed a 25 per cent tariff on most Indian goods.

Fresh tariff announcements by Trump fanned fears of a global trade war, leading to a rout in base metals while safe-haven demand lifted precious metal gold last week, analysts said.

They said the unexpected US tariff structure, especially on semi-finished copper goods, sent shockwaves across global commodity markets, with copper prices tumbling sharply and crude oil showing mixed trends amid geopolitical concerns.

Copper crashes as US slaps tariffs on semi-finished imports

Copper was the worst-hit among base metals as the Trump administration imposed a steep 50 per cent tariff on imports of semi-finished copper goods such as wires, tubes and rods. The new duties will come into force from August 7.

However, refined copper, ores, and cathodes were excluded from the levy, creating uncertainty in global supply chains.

On MCX, the August contract of copper fell by Rs 16.35 or 1.82 per cent last week. On July 31, copper prices dropped by Rs 36 or 4 per cent to hit an all-time low of Rs 861.70 per kg.

On COMEX, copper prices initially fell nearly 22 per cent from peak levels before rebounding by 1.79 per cent to close at USD 4.45 per pound. LME Copper futures ended the week up 0.31 per cent at USD 9,639.60 per tonne.

"President Trump's tariff announcements have sent shockwaves across global commodity markets, particularly metals. The US imposed a 50 per cent tariff on semi-finished copper products, a 25 per cent levy on Indian imports, and additional trade penalties related to Russian energy transactions," Riya Singh - Research Analyst, Commodities and Currency, Emkay Global Financial Services, said.

"MCX copper prices dropped from Rs 900 to Rs 861 in just three sessions before stabilising. The exclusion of raw forms like cathodes from the tariff list has led to confusion in price discovery," Singh added.

She noted that traders exited long positions aggressively, leading to the largest weekly outflow in over a year and adding that "India imported over USD 1.4 billion worth of refined and semi-refined copper in FY24. With the US market restricted, these goods may be diverted to India, risking margin pressure for local fabricators".

According to Heena Naik, Research Analyst - Commodities, Angel One, the US administration initially hinted at wide-ranging copper tariffs, causing a rush of shipments into the US ahead of the August 1 deadline.

"Now, with refined copper excluded from the tariff list, there are concerns of re-exports and a potential oversupply. The sudden narrowing of the tariff scope has disrupted the global copper supply chain," she said.

Naik also highlighted China's indirect exposure, being the world's top producer of copper products, and added that base metals broadly fell over 1.5 per cent last week amid weak demand and tariff headwinds.

Gold and silver trade mixed

On the Multi-Commodity Exchange (MCX), gold futures for October delivery rose Rs 1,292 or 1.3 per cent last week. In global markets, COMEX gold futures surged USD 51 or 1.52 per cent to settle at USD 3,413.80 per ounce in New York on Saturday.

Silver, on the other hand, extended losses. MCX silver futures for September delivery plunged Rs 2,829 or 2.5 per cent to end the week lower.

COMEX silver futures managed marginal gains of 0.59 per cent to close at USD 37.08 per ounce.

"Gold continues to be viewed as a reliable store of value, especially with the US Fed maintaining a restrictive policy stance and global uncertainties flaring," said Riya Singh, Research Analyst - Commodities and Currency at Emkay Global Financial Services.

She noted that gold has gained nearly 25 per cent year-to-date, peaking above USD 3,500 per ounce in April on the back of Middle East tensions and inflation worries.

"Silver, however, faced a dual impact of industrial weakness and ETF-led support. It is under pressure due to weak Chinese PMI data, but strong ETF holdings and robust COMEX inventories offer a cushion," Singh added.

Crude oil sees mixed cues

Crude oil futures posted a mixed performance, with the MCX futures for August delivery rising by Rs 100 or 1.73 per cent. Globally, Brent crude futures fell by 3.94 per cent to USD 69.67 per barrel, while WTI crude slipped 2.79 per cent to USD 67.33 per barrel.

Riya Singh said, "Brent retreated from USD 67.74 to USD 71.26 after failing to sustain five-week highs. Demand concerns from geopolitical uncertainty and trade disruptions kept the rally in check".

She highlighted that India's crude imports are particularly vulnerable, with around 35 per cent coming from Russia. Adding that any secondary sanctions on Russian oil imports could force India to more expensive alternatives, which could impact domestic refiners such as IOC and Reliance, and affect the rupee.

Heena Naik added that crude surged by over 5 per cent as investors focused on developments on the US President's tighter deadline for Russia to end the war in Ukraine. However, a weak industrial demand and uncertainty over OPEC+ supply decisions kept oil prices under pressure.

Commodities to see volatility this week

Analysts emphasised that as investors deal with the effects of US tariffs, China's economic slowdown, and shifting geopolitical tensions, commodity markets are expected to be turbulent in the weeks ahead.

"Price discovery has been skewed by Trump's tariff structure, which targets semi-finished goods while excluding raw copper forms. Regarding demand and future trading channels, the market is still unclear," Singh stated.

Naik said that investors should prepare for ongoing fluctuations in base metals, energy, and precious metals due to policy uncertainty and the rising US dollar's impact on global commodities.