MORNING CALL: Trade War Shifts Into Next Gear; Gold & Oil

*China makes a major threat and tech sector drops *Trade war threat isn't fuelling demand for gold *Oil gains may have shorter life span. 

There are no sign of trade tensions de-escalating, the trade war has become a bare knuckle fight. In the latest around of sparring, China has threatened the US about its dependence on rare earth minerals which are crucial in the production of technology products. The US needs to have a plan in place in order to fight with this threat, because this is huge. It is going to impact the technology sector. For this particular reason, the US futures and European markets are trading soft today.
The strong rhetoric by China on the trade war isn’t stimulating the demand for the precious metal. In other words, investors do not hold much love for the riskier assets, we are still not seeing any strong upward movement in the precious metal. It is like if investors do not care about the safe haven trade, they would rather stay on the side line. Putting money in gold isn’t their priority for now, perhaps a fatal mistake.
A major reason for the weakness in the gold price is mainly due to the strength in the dollar index. The dollar index is up nearly 2% for the year. There is more interest for the US Treasuries and this is the reason that the yields are dropping like a rock. The inverted yield curve is the result of this.
In the oil market, there is some optimism after the inventory data confirmed that the supply glut isn’t building. However, any upside move in the oil price is open to the threat which comes from the on going trade war. Remember, this situation is going to impact the demand enormously, regardless of the oil inventory data. So, I will not be too optimistic for any upward move.