US Open – Markets enter wait-and-see mode, Oil and Gold weaken ahead of holiday weekend

Global equities are all green as investors squared up positions on the last trading day of the month.  With no major updates on the trade war, investors will wait-and-see if September will see any de-escalations with tariffs as we start to see the economic pain be passed onto the US consumer. Time is running out on President Trump to secure a trade deal and possibly delay a US recession further into 2021.  

Calls for China to delay any immediate trade deals and play the long game are raising the specter that we will not see a deal until after the 2020 US Presidential election.  The world’s second largest economy could choose to continue to grow their domestic consumption and see them try to diversify their supply chains away from the US.  Trump and Xi are playing heads-up no-limit hold ‘em and the latest hand of escalations may have given Xi a slight lead in chips.  This high stakes trade war will likely be dragged out a while longer, but September will be pivotal in finding out if we see talks completely fall apart and drive a market correction with US equities. 

Oil

Oil is finishing up what was a very good week on a down note.  Energy prices benefited greatly from a huge drop in US stockpiles and some constructive rhetoric from the US-China trade war.  Today’s 1% drop with oil could be short-lived as we see hurricane season pickup and we will likely see tensions pickup again in the Persian Gulf.  Optimism that stemmed from G7 that the US could meet with Iran in the coming weeks is likely to fall apart.  The US sanction strategy has been working on delivering economic pain to Iran and we will likely see the US put any diplomatic talks on ice until we know how the US-China trade war will unfold. Iran’s demands for an easing of sanctions has practically no chance of being of met.

Gold

Gold bulls appear to already be enjoying the long weekend as the long-term rally takes a break.  Safe-haven demand has dwindled somewhat on the constructive trade talk comments from earlier in the week.  The wildcard for gold traders is a recent wrath of central bank buying that is coming from multiple emerging market economies.  India has increased their holding 9.2% in the year ended in June, the largest increase in almost a decade. 

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