On Tuesday, escalating tensions in the Middle East and US tariff uncertainty triggered significant volatility across commodities and currencies. The Canadian Dollar (CAD) eased from its daily highs against the US Dollar (USD), with the USD/CAD pair returning above 1.3800 from session lows at 1.3775. This move was attributed to a risk-off mood stemming from threats by Iranian authorities to attack energy infrastructure in the Gulf, including US oil and gas interests, if Iran is targeted again. Qatar also called for reopening the Strait of Hormuz to avoid an 'industrial catastrophe' [1]. The stalemate in the US-Iran conflict, ongoing for six months, pushed Brent Oil prices to two-month highs above $97.00 per barrel, providing some support to the CAD, given crude oil is Canada's main export [1].
Gold (XAU/USD) reversed early gains, trading around $4,400 after reaching an intraday high near $4,443. The precious metal struggled as the US Dollar rebounded and oil prices rose, following attacks by Iran-backed Houthis on energy facilities in four southern Saudi cities. The US Dollar Index (DXY) recovered to 98.97 from 98.72, its lowest since August 21. The near-term outlook for gold remains challenging, with traders focusing on how higher oil prices could impact inflation and interest rates. The Federal Reserve has not raised rates this year, but Friday's stronger-than-expected US Nonfarm Payrolls report eased labour market concerns and gives the Fed more room to focus on inflation. The CME FedWatch Tool shows a 60% probability of a 25-basis-point rate hike at the Fed's September 15-16 meeting, with the decision likely hinging on upcoming US inflation data [2].
Copper prices surged to a record high of $14,697 per ton at the London Metal Exchange (LME) on Tuesday, rallying 2.75% so far in September. Analysts attributed this to additional US tariff risks and supply shortages. Deutsche Bank noted copper's all-time high (+0.57%) was driven by ongoing supply concerns and potential US tariffs. Commerzbank highlighted anticipation of expanded US tariffs on refined metals and reported Chile's copper production fell 9.4% year-on-year due to adverse weather. TD Securities pointed to continued inventory draw amid tariff uncertainty and tighter physical conditions in China as supporting copper prices. Technical indicators show copper's rally is overstretched, with the RSI above 72 and MACD positive, suggesting strong but potentially stretched momentum. Resistance is expected at $14,860 and $15,000, while support lies near $14,100 and $13,861 [3].
Analyst opinions from TD Securities suggest the CAD will underperform its peers going forward, even as trade developments inject headline risk. They caution that a meaningful breakthrough in USMCA negotiations appears unlikely, limiting the scope for a sustained CAD rebound [1]. For gold, the outlook depends on US inflation data, with hotter readings strengthening the case for a Fed rate hike and softer figures offering relief to gold prices [2]. Copper's rally is seen as underpinned by both policy risk and physical market tightness, with technical momentum indicators signaling a potentially overstretched market [3].
CONCLUSION
Escalating geopolitical tensions and tariff uncertainty have driven sharp moves in oil, gold, copper, and currency markets. The Canadian Dollar is pressured by risk aversion despite higher oil prices, gold faces headwinds from a rebounding US Dollar and rate hike expectations, and copper rallies on supply concerns and tariff risks. Market participants are closely watching upcoming US inflation data and Fed decisions for further direction.