- Escalating U.S-China Tensions
- Increasing Gold Liquidation
- Weak Economic Data
Oil, Gold (XAU/USD) and Copper price edged lower in early Monday trading session in what could turn out to be a defining week for the commodities. Rising tensions between the U.S and China appears to taking a toll on investor sentiments on the three commodities.
While Oil prices have rebounded from all-time lows following the COVID-19 fallout, a move by China to impose new restrictions on Hong Kong is threatening tensions with the U.S. China has already warned that the U.S is pushing toward a new cold war given Donald Trump administration rhetoric on coronavirus, as well as China’s involvement on Hong Kong.
A standoff between the two countries could take a toll on oil prices after a 75% rally since the start of the month. Oil has surged in recent weeks as demand continues to edge higher on easing of COVID 19 restrictions.
Gold prices, which are up by more than 10% for the year, are also at risk of edging lower as bearish sentiments continue to build at seven-year highs. Gold prices face heightened liquidation from current highs as traders look to get hold of cash amidst a looming economic and political crisis pitying China and U.S.
Weak U.S economic data could take a toll on Gold prices later in the week on Q1 U.S GDP data falling below expectations. The market expects a -4.8% contraction, of which a much bigger contraction would mark the biggest contraction since the 2009 financial crisis.
Copper Prices Drop
Copper prices are also on edge in response to the rising tensions between the U.S and China. Investors are increasingly switching their attention to safe haven such as the U.S Dollar leading to a further decline in industrial metal prices. Lockdown restrictions designed to curb the spread of the COVID-19 pandemic has also taken a toll on the Copper price given the reduced industrial activity around the world.