Oil Slips, Gold Rises on US-China Talks

Oil prices slip and gold perks up as economic advisor Larry Kudlow confirms US-China trade talks later in August.

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Oil prices were down on Friday in spite of the seemingly easing tensions between the United States and China after the White House economic advisor Larry Kudlow confirmed that Chinese and US officials will hold talks later in August to continue trade discussions.

Brent Oil futures for October delivery inched down 0.05 percent to $71.40 per barrel, while WTI Crude oil futures for delivery in September also slipped 0.03 percent to $65.44 per barrel.

Brent is now on track for its third weekly drop in a row, while WTI is pointing at a seventh week of losses.

During an interview, Kudlow stated that China should acknowledged that US President Donald Trump is eager and determined to get a good deal at the first major meeting between the two countries in over a couple of months.

“The Chinese government, in its totality, must not underestimate President Trump’s toughness and willingness to continue this battle to eliminate tariffs and nontariff barriers and quotas, to stop the theft of intellectual property and to stop the forced transfer of technology,” said Kudlow.  “Those are the asks that we’ve been making now for quite some time.”

Markets were concerned that a possible full-blown trade war between the US and China could make global economic growth sluggish and lower down consumption, while a standoff between the US and Turkey consequently fueled contagions among emerging markets.

“You would have renewed expectations for continued growth out of China, which is underpinning everyone’s assumptions.  If those trade concerns go away, then the world is going to look a lot more rosy,” stated Michael Loewen, who is a commodities strategist at Scotiabank in Toronto.

Oil prices were still under pressure after the data from the Energy Information Administration showed on Wednesday that the US crude inventory level surprisingly spiked by 6.8 million barrels in the week that ended August 10.  Analysts had previously forecasted stockpiles would fall by around 2.5 million barrels.

Gold Perk Up on Trade Talks

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Meanwhile, Gold prices traded a tad higher on Friday as the US dollar slipped after Kudlow’s confirmation of the meeting between the US and China.

Gold futures for delivery in December gained 0.03 percent to $1,184.2 per troy ounce on the Comex division of the New York Mercantile Exchange, while the US dollar index, which gauges the greenback’s strength against a basket of six other major currencies, dropped 0.03 percent to 96.45,

“The ‘risk on’ mood generated by the news of the US-China trade talks is weighing on the dollar, while prompting some buy backs of the euro, which has been hit earlier this week by Turkish concerns,” stated Shin Kadota, senior strategist at Barclays.

“Next week, the main focus will likely shift to US-China trade issues from Turkey with Chinese delegation visiting Washington and as $16 billion in new tariffs on Chinese good are due to take effect,” Kadota added.

The lira crisis also somewhat eased up as Berat Albayrak, who is Turkey’s finance minister, described the current situation as a “market anomaly” and that he is confident Turkey would become stronger emerging from the crisis.

On the flip side, some analysts  remained concerned in spite of the minister’s statement. 

“Albayrak’s plan to stabilize Turkey’s economy invites skepticism.  Fiscal policy to do heavy lifting via cuts.  Little to say on interest rates.  Thus Erdogan’s dotty views on rate rises/inflation still prevail,” said Robert Ward from the Economist Intelligence Unit.

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