US Close – Trump presser announcement sinks risk, Oil pares gains, Gold’s glut issue

Risk appetite quickly disappeared after President Trump announced he would address China tomorrow at a press conference.  It didn’t take much to help traders rush to exits.  Aggressive short positions have been growing for the S&P 500 index and it seems intensifying tensions between the US and China will be the catalyst to derail some of the reopening momentum that drove a vast majority of stocks higher. 

This is not just a US-China spat, as the rest of the world is showing frustration over Beijing’s decision to impose a national security law in Hong Kong.  The UK, Australia, Canada, and United States issued a joint statement formally expressing their concern over China’s actions.

Wall Street is getting nervous that President Trump could be quickly nearing the nuclear option of fully revoking special economic and legal privileges granted to Hong Kong.  This was always a fear, but it didn’t seem like that would be an option this side of the Presidential election. 

Oil

Oil prices pared gains after President Trump’s press conference announcement.  For the crude demand outlook to continue to improve, the energy market needs China and the US to get along.  Oil prices have been rising higher as reopening momentum continues to support calls for an improvement with demand.  The oil market is still working its way to balance and could be vulnerable to the downside on any hints that oil-producing nations are quickly ramping up production. 

Gold

An imbalance issue for gold at the New York exchange is providing an unwanted headache just like we saw with oil last month. Steep discount with future contracts are happening as lockdowns make it harder for delivering supplies.  Investment demand is strong for gold, but delivery is not what these investors want.  Gold will not see a historic plunge, but could see limited upside with the escalating tensions between the US and China. 

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Ed Moya

Ed Moya

Senior Market Analyst - The Americas at OANDA
With more than 20 years’ trading experience, Ed Moya is a market analyst with OANDA, producing up-to-the-minute fundamental analysis of geopolitical events and monetary policies around the world. Over the course of his career, he has worked with some of the world’s leading forex brokerages and research departments including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including BNN, CNBC and Bloomberg, and is often quoted in leading publications including the Wall Street Journal and the Washington Post. He holds a BA in Economics from Rutgers University.
Ed Moya