The stronger dollar and speculation that a trade war will hamper demand fueled a drop in raw materials, with the Bloomberg Commodity Index declining for a second straight day. Federal Reserve Chairman Jerome Powell said this week that trade is a “risk” to the outlook, and that concerns about changes in trade policy are rising even if the impacts aren’t yet seen in economic numbers.

The tariffs mean China “won’t be importing as much of the base metals,” said Peter Thomas, a senior vice president at Chicago-based metals broker Zaner Group. “As these tariffs take affect, we’ll see less consumption from each side until it gets settled. It started with base metals and it’s pulling on gold.” China is the biggest consumer of industrial metals.

Gold futures for August delivery fell 1.6 percent to $1,292.20 an ounce at 10:14 a.m. on the Comex in New York, on course for the biggest decline since May 15.

Eoin Treacy's view

Donald Trump is not a conventional politician, he is in fact following through on his campaign promises even though no one seems to have believed he was serious before he was elected. As Angela Merkel pointed earlier this week, the USA enjoys a net surplus with Germany when service providers like Google and Facebook are included. However, that kind of finessing of the data is not something the base Trump is appealing to is interested in.

China’s economy is already under pressure from attempts to contain the shadow banking system and as an export-oriented economy is more sensitive to trade tariffs than the USA; though neither is likely to benefit from a deteriorating situation.

The Continuous Commodity Index pulled back sharply today and is now testing the region of the trend mean. It will need to demonstrate support in this area if medium-term scope for continued higher to lateral ranging is to be given the benefit of the doubt.

Brent Crude oil extended its decline today and remains in at least a reversionary environment as Russia plans to ramp up production.

Gold pulled back sharply, confirming resistance in the region of the trend mean. It will need to rebound smartly if a further test of underlying trading is to be avoided.

Soybeans are now testing the lower side of a two-year range but a clear upward dynamic will be required to check momentum beyond a pause.

Wall Street pared its earlier decline to finish out the day relatively unchanged. Quadruple witching was today which may have contributed to some hasty decisions being made early in the session while bargain hunters quickly appeared about midway through the session. The S&P500 pared its intraday decline to finish pretty much unchanged. The Index posted downside key reversals from below the 2800 level in February and March so it is a natural area for a pause. However, in the absence of a clear downward dynamic, sustained for more than a day or two, the benefit of the doubt can continue to be given to the upside.