(Bloomberg) — Gold and copper climbed, boosted by a falling dollar, as investors awaited the final outcome of the U.S. presidential election, with Joe Biden on the brink of taking the White House from Donald Trump.
The still-unresolved outcome — due to an unusually large number of mail-in ballots because of the coronavirus — spurred the market to reassess the potential scale and timing of a much-needed U.S. fiscal stimulus package, while a gauge of dollar tumbled to the lowest since May 2018 amid improving risk sentiment, with investors beginning to price in a Biden presidency.
Bullion rose past its 50-day moving average to touch the highest since Oct. 12, and the dollar weakness also helped boost base metals and crop prices, with copper erasing losses ahead of the opening of U.S. markets.
“A Biden win with a Republican-controlled Senate is likely to deflate the reflation focus; but that could be offset by the volatile political outlook that now awaits in Washington,” said John Hardy, head of FX strategy at Saxo bank A/S.
Congressional Democrats face a loss of leverage in negotiations for a new U.S. stimulus package, over the roughly $2 trillion that had been discussed by the Trump administration before the Nov. 3 election.
Copper climbed as the dollar retreated, erasing losses seen earlier as uncertainty over the outcome of the election contributed to light volumes in Asian and early European trading hours.
At a fundamental level, investors are weighing the toll that new lockdowns could take on demand, as well as mounting supply risks as miners battle to keep operations running smoothly through the pandemic.
Analysis of satellite data carried out by Jefferies Group, which tracks several major copper mines, shows that daily production rates increased by 2% year-on-year in the third quarter, despite visible activity dropping 27%, the company said in an emailed note on Thursday.
“Production has ramped up despite workforce constraints, signaling an under-appreciated supply squeeze and a path to a higher copper price,” Jefferies analysts Christopher LaFemina and Petar Petrovski wrote. “We expect activity levels to remain subdued as risks of additional Covid-related lockdowns mean the slowdown that began in April should continue.”
Agriculture
A weaker dollar is helping to boost prices for agricultural commodities as traders await a definitive outcome of the U.S. presidential election.
Meanwhile, lingering political uncertainty in top cocoa grower Ivory Coast drove futures in New York to the highest in nearly a week.
The U.S. and European Union appealed to Ivory Coast’s political leaders to hold talks over the nation’s disputed election, as a key opposition leader Guillaume Soro urged the military to defy President-elect Alassane Ouattara. Coffee and sugar futures also gained on Thursday.
Soybeans rose to the highest level in four years in Chicago on strong U.S. exports, while concern lingers that dryness will hurt output in rival shipper Brazil.
U.S. soybean exports in September doubled from a year earlier, according to the country’s Census Bureau.
“This was a record for the month of September and the largest monthly shipment of beans in nearly two years,” broker Benson Quinn Commodities wrote in a report.
Dryness will spread in Brazil over the next few days, increasing stress on the nation’s soybean and corn plants, forecaster Maxar said.
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