U.S. Ready to Impose Tariffs on $50B of Chinese Imports

Commodity prices retreated in the wake of the soaring U.S. Dollar and political turmoil in Italy and Spain. Traders fear that the mounting issues in the Euro Zone may cause a loss of economic momentum in the region which is raising questions about the sustainability of the recovery. This could lead to an erosion in demand for certain commodities such as copper and crude oil.

Comex High Grade Copper – Potential U.S.-China Trade War Spurs Demand Worries

Copper prices hit their lowest level since May 16 on Tuesday, pressured by the firmer dollar and as Italy’s deepening political crisis encouraged investors to dump risky assets.

July Comex High Grade Copper settled at $3.0625, down $0.0150 or -0.49%.

Traders also reacted to news that the United States will continue with imposing tariffs on $50 billion of imports from China unless Beijing addresses the issue of theft of U.S. intellectual property.

China state media criticized the U.S. announcement that it would press ahead with restrictions on investment by Chinese companies, saying that Beijing was ready to fight back if Washington was looking to reignite a trade war.

Comex Gold – When Will It Act Like a Safe-Haven Asset?

Gold posted a wicked two-sided trade on Tuesday before closing lower. Traders were a little tentative about picking a direction because they are confused about how to play the short-term fundamentals. On one hand, the stronger U.S. Dollar should keep a lid on gold prices. Since gold is a dollar-denominated asset, it tends to weaken when the Greenback strengthens.

August Comex Gold settled at $1304.10, down $4.90 or -0.38%.

On the other hand, gold is also a safe-haven asset. During times of economic upheaval, investors tend to seek shelter in gold for protection. At some point, the situation in Italy and Spain may escalate to the point where gold will become a desired asset.

Crude Oil – Increased Production Worries Still Weighing on Prices

U.S. West Texas Intermediate and international-benchmark Brent crude oil settled lower on Tuesday as investors continued to assess the potential damage from increased production from Saudi Arabia and Russia.

July WTI crude oil settled at $66.73, down $1.15 or -1.72% and July Brent crude oil finished the session at $75.39, down $1.05 or -1.39%.

According to reports, Saudi Arabia and Russia have discussed raising OPEC and non-OPEC oil production by 1 million barrels per day (bpd) to counter potential supply shortfalls from Venezuela and Iran.

Natural Gas – Profit-taking Drives Market from Four-Month High

Natural gas futures tumbled on Tuesday, amid profit-taking and updated weather forecasts calling for milder temperatures during the second week of June. The market rallied to a four-month high last week on the back of extremely hot temperatures over most of the country.

July Natural Gas settled at $2.903, down $0.060 or -2.07%.

The return of more seasonal temperatures should lead to lower cooling demand, which should encourage further profit-taking from current price levels.