Gold prices traded a bit lower on Tuesday as the greenback edged up after a steep decline in the previous session. Meanwhile, oil prices slipped on Tuesday in spite of a late-night response from US president Donald Trump, who threatened severe consequences for Iran.
Gold futures for delivery in August in the Comex division of the New York Mercantile exchange were down 0.47 percent, trading at $1,219.8 per troy ounce.
Some attention were brought back to trade tensions after Li Jinzhang, who is the Chinese ambassador to Brazil, said on Tuesday that the country aims for a “long-lasting relationship” with Brazil in terms of trade in agricultural goods and other products in light of the heightened trade friction between the United States and China.
According to Li, the two countries are ready to take their trade relationship “to new levels.” He also said that they should take advantage of the multilateral mechanism, such as the World Trade Organization in order to strengthen ties between China and Brazil, which started “some 200 years ago.”
Meanwhile, the dollar was steady on Tuesday after it fell sharply during the previous session. The previous decline was caused by Trump’s statement on Friday that he was “not thrilled” about the Federal Reserve’s move for another interest rate hike.
The US dollar index, which gauges the dollar’s strength against a basket of six other major currencies, gained 0.01 percent, trading at $94.43.
A better-performing greenback makes dollar-denominated gold more expensive for traders using other currencies, effectively making it less attractive for investors.
Last Saturday, Treasury Secretary Steven Mnuchin attempted to ease fears of a currency war at the G-20 meeting, affirming the Fed’s independence and stating that the government would not intrude. Mitsuo Imaizumi, who is the chief currency strategist at Daiwa Securities, stated, “The US economy is in a very healthy state overall. It is unimaginable the Federal Reserve would stop raising interest rates.”
Oil Prices Slipped despite Trump’s Tweet
Oil prices declined after Trump threatened Iran of severe consequences on a tweet.
Crude Oil WTI Futures for delivery in September slipped 0.29 percent to $67.29 per barrel, while Brent Oil Futures for delivery in September also dipped 0.25 percent to $72.88 per barrel.
Over the weekend, Iran’s leader warned that it might shut the Strait of Hormuz, which is the world’s most important seaborne transit lane for oil.
“Iran’s power is deterrent and we have no fight or war with anybody but then enemies must understand well that war with Iran is the mother of all wars,” according to the English translation on the Iranian president’s Rouhani’s official website.
Trump, on the flip side, tweeted in response: “To Iranian President Rouhani: Never, ever threaten the United States again or you will suffer consequences the likes of which few throughout history have ever suffered before. We are no longer a country that will stand for your demented words of violence & death. Be cautious!”
Even though most believe that oil prices would increase if Iran shut down the Strait of Hormuz or engages in military conflict with the US, oil prices apparently have been little moved from the development so far.
“I think the market’s a little complacent,” stated Bob McNally, who is the founder and president of energy consultancy The Rapidan Group. “Maybe they’re thinking this is a repeat of North Korea. The president will tweet about fire and fury and before you know it, the president and President Rouhani will be in Geneva having a meeting and talking about a deal.”