Commodities Daily - August 26, 2019

> Oil slides on sharp US-China trade war escalation amid dovish Fed. After sliding slightly below $58.5/bbl this morning, Brent surged to $59.5/bbl, buoyed by Trump saying that China had called and requested restarting trade talks. However, China's Foreign Ministry spokesman said: "I haven't heard of such a thing". We think that Brent is more likely to slide below $59/bbl later today amid the deterioration in risk sentiment. The presence of Iran's foreign minister at G7 this weekend and reports that he is negotiating a 0.7 mln bpd export quota for Iran (even though Trump this morning said that it was too soon to meet Iranian officials) are likely to provide additional headwinds to oil prices.> Gold rallying on escalation in US-China trade war. Gold surged to $1,553/oz this morning before correcting to around $1,530/oz. It remains supported amid increased demand for safe-haven assets. Although a phone call between the US and Chinese trade delegations was scheduled for tomorrow, it is unclear at this point whether it will actually take place. Gold is likely to trade in the $1,520-1,530/oz range for most of the day today unless major political headlines emerge. The Chicago and Dallas Fed indexes and durable goods orders are due from the US today.> Holiday in the UK today will limit trading in base metals. Prices on base metals have resumed dropping this morning in Shanghai and will likely be under pressure during US trading. The further weakening of the yuan and escalating trade war are fundamental risks to base metals, which may lead to a downturn in prices.