Weekly look at Commodities

US President Donald Trump announced on Friday that his administration was retaliating against China’s move to increase tariffs on American products with increasing tariffs on Chinese goods.

Trump tweeted that tariffs on the existing 250 billion dollars-worth Chinese imports was to be raised from 25% to 30% on October 1. He also said additionally, the remaining 300 billion of goods and products from China, that was being taxed from September 1 at 10%, will now be taxed at 15%. Beijing had earlier decided to new tariffs on 75 billion dollars worth of US goods.

The heightened trade tensions make investors flock to safe haven assets.

On Monday, Trump on Monday Beijing had contacted Washington and said that it wanted to return to negotiations which are expected to restart in September. As Trump hinted at a deal, China’s Vice Premier and chief negotiator Liu He said that Beijing was willing to find a solution through “calm” negotiations and expressed ‘resolute opposition’ to the escalation of the conflict.

Federal Reserve Chair Jay Powell on Friday fell short of signalling any future interest rate cuts in a speech at the central bank’s annual Jackson Hole meeting. Powell pointed at the political administration for apparent setbacks to the US economy. “We have much experience in addressing typical macroeconomic developments. But fitting trade policy uncertainty into this framework is a new challenge. Setting trade policy is the business of Congress and the Administration, not that of the Fed,” he stated.

Oil prices have come under fresh pressure from the intensifying trade war between China and the US. The increasing retaliatory tariffs between the world’s two largest economies is destroying any remaining hopes that a global recession can be avoided. The concerns over slowing economic growth in China and worldwide keeps pushes brent down. Remarks from Trump and Chinese officials will be crucial in setting a direction for the commodity.

Supportive for the oil is an apparent reduction in the rhetorical confrontation between the US and Iran whose oil tanker was released by Gibraltar last week. Trump joined other world leaders at the G7 summit in France to voice the need to find a solution to the crisis with Iran.

Fed Chair J. Powell’s statements on monetary policy at the Jackson Hole Symposium last week increased volatility in the commodity’s price. The increasing tensions in the US-China trade war, the precious metal started the week quite positively. Following the the decision by President Trump to increase tariffs by 5 percent on 300 billion dollar-worth Chinese goods, the pricing in gold saw another rise. The monthly increase in precious metal, trying to be permanent over 1500, continues to rise towards the 1540 region. Technically, the rise in the commodity that is in the overbought area may go up to 1588, the highest in the last 7.5 years, due to trade tensions. In addition to trade tensions, upcoming growth figures in the US during the week may also lead to volatility in the precious metal. Technically, in case of a possible sell pressure, the 1520 and 1500 levels will act as support.

While the supply-demand curve in oil remains weak, increasing trade risks continue to create volatility. The negative US inventory stocks data released last week and the number of boreholes announced on Friday triggered an increase in oil prices, while US-Chinese tensions are putting pressure on them. The bidirectional developments caused the commodity to continue a search for directions, leading to a channel-driven pricing. As the American inventory stocks data to be released on Wednesday will maintain impact on oil prices in the short term, we will be monitoring trade-related developments. Within the current price movement, 67.00 and 69.50 levels will be followed in terms of resistance during possible upward movements. In the case of a sell pressure, 63.50 level will remain as a support in the first place. We will then be following 62.00 level in if the fall persists under that region.

The demand for safe havens supports the rise in silver. The US-China tensions and global recession fears put silver on the peak of the last two years. We think that this region will determine whether the current rise in the commodity that has reached the exponential average region of 120 months goes on. Although the fundamentals used as argument for a further rise stand, for the rise to continue in the movement that has reached a saturation we will be following to see if the price stays above the level of 17.800. If it exceeds this region, we will be monitoring the 19,300 and 21,000 levels. In case of possible sell pressure, the levels of 16.900 and 16.000 will be support lines.

The heatwaves across Europe and the US and record-breaking production in natural gas lead to continued sale pressure in the commodity. The current uptrend in the commodity, which is technically on a rising path, continues to to act as a corrective move. If the upward mobility reaches the 23.6 percent Fibonacci retracement level, the 2.50 level will be followed as resistance. If the rise exceeds this zone, 2.62 may enter our radar. In case of possible withdrawals, the levels 2.32 and 2.27 will act as support lines.


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