Commodities Reverse Trends on Ceasefire, Movement Still Uncertain: Interview

Chennai: The announcement of a ceasefire in Iran has reversed trends in the commodity and currency markets. While gold, silver, platinum and copper have moved up, crude oil and natural gas prices have declined. The US dollar has weakened, and the rupee has made some gains. However, the reversal in commodity prices remains uncertain as the ceasefire and broader peace in West Asia lack clarity, says Jateen Trivedi, VP, Commodities and Currencies, LKP Securities.

Q) The ceasefire announcement has led to a trend reversal in commodity markets, especially gold, silver, platinum, copper, crude and natural gas. Can we elaborate on this?

About 12–13 hours before this, markets were expecting a major attack on Iranian infrastructure. However, the ceasefire came as a surprise, and such unexpected developments typically trigger sharp market reactions and reversals in sentiment.

The overall trajectory will depend on how ceasefire talks progress over the next two weeks. Gold and silver have seen positive rallies of 2–4%, while crude oil has reacted negatively, falling about 15% on the news.

Q) What about platinum and copper? Even those metals have appreciated.

Platinum, along with bullion, has shown strength due to inflation concerns that were expected to arise. Now, some relief is visible as the dollar index has softened, and assets linked to crude oil and the dollar have reacted positively. Platinum has rallied about 5%, while copper prices have risen 2–3%.

Q) There has been a sharp fall in crude oil and natural gas. Can you explain this?

The biggest reaction has been in crude oil, which had surged 80–90% over the past month due to escalating tensions, rising from $65–70 to peaks of $115–120 for WTI and Brent. The current reversal reflects easing tensions following the ceasefire.

Q) There has also been movement in the currency markets, especially the US dollar and rupee. Tell me about that.

The dollar index has remained relatively stable, with limited upside, as the 100 level has acted as strong resistance. Ongoing US debt concerns and tariff-related issues continue to weigh on growth prospects, limiting dollar strength despite geopolitical tensions.

The dollar has been moving in a range of 98–100. If ceasefire talks progress positively, the index could drift towards 95–96.

Q) What about the rupee?

The rupee has appreciated about 0.5% following the ceasefire. Government and RBI measures to support the currency, along with banks unwinding excessive long dollar positions, helped it strengthen from around 95 to 93.5–93.9.

If crude oil prices continue to decline, the rupee is likely to gain further.

Q) Is this just a temporary blip or a sustained trend?

As long as ceasefire talks remain positive, the rupee and other asset classes will find support. However, any violation could trigger sharp negative reactions. This is not a permanent resolution yet, but an early stage of de-escalation.

Q) Coming to gold and silver, From their peak levels in January end, both the metals had technically entered into a bear market. Gold is preferred as a safer than ever asset during geopolitical tensions. This time, gold fell around 15 % and silver 20 % in the Indian market since the Iran war started. Why were investors buying bullion during this crisis and what were they buying instead?

Compared to the 2022 Russia–Ukraine conflict, the current situation involves the US directly. When the US is involved, inflation tends to rise, strengthening the dollar and limiting gains in gold and silver. War premium builds only if the conflict persists for a longer duration.

If the ceasefire holds, lower inflation could give the Federal Reserve room to cut rates, which would support gold. However, gold did not fully price in war premium during March.

Q) What about the relationship between crude oil and gold?

Timing played a key role. Gold had already rallied significantly over the past two years, reaching peak levels earlier this year before correcting by around 20%. Margin calls and profit booking added pressure, and the war further triggered volatility.

If gold had not rallied earlier, it may not have corrected as sharply during the conflict.

Q) Prices also fell in February. Was that due to margin hikes?

Yes, largely due to margin-related pressures. February saw a combination of higher margins, rising geopolitical risks and profit booking, leading to the correction.

Q) Have margins eased now?

Margins remain somewhat elevated, though lower than the earlier peak levels.

Q) What is your outlook for metals? Will they revisit record highs?

The near-term outlook remains volatile and news-driven. Domestic gold prices may trade between Rs 1.35 lakh and Rs 1.65 lakh, while COMEX gold could range between $4,000 and $5,500.

Over the longer term, US debt concerns, tariff issues and central bank buying will continue to support gold prices, providing a strong base at lower levels.

Q) Will the Federal Reserve’s policy support bullion?

Earlier, the Fed was focused on inflation, limiting gold’s upside. Currently, one rate cut is expected in 2026. If the ceasefire holds and tensions ease, the Fed may have room for additional easing, which would support gold.

A dovish stance could push prices towards $5,500–6,000, though this depends on multiple factors aligning.

Q) If the war resumes, will bullion correct again?

Yes. A renewed conflict would push crude oil prices higher, which is negative for most asset classes, including gold, as it would restrict the Fed’s ability to cut rates.

Q) Will gold and silver move similarly going forward?

Silver has strong structural demand, but its recent surge above $100 indicated overbought conditions. While such sharp rallies may not repeat immediately, prices are likely to stabilise before resuming a gradual upward trend.

Over the medium to long term, both metals are expected to rise, with silver likely to outperform gold.

Q) Coming back to crude and natural gas—can they return to pre-war levels?

If tensions ease and the ceasefire evolves into a formal agreement, crude oil could fall back to $60–65 levels.

Q) And if tensions escalate again?

Then $120–125 may not act as a ceiling, and prices could move even higher.