(Bloomberg) — Gold and copper slumped while oil rose with U.S. equity futures, as tight races in battleground states in the U.S. election raised the prospect of a prolonged wait for the final result.
Most commodities were dragged lower as the dollar rallied, with the unexpected closeness of the race sparking risk aversion across financial markets and spurring a flight to the safety of the greenback.
President Donald Trump has once again defied polls and predictions, with a better-than-expected showing that appeared to significantly shrink Democrat challenger Joe Biden’s path to victory. The incumbent falsely declared early Wednesday he had won re-election and said he would ask the Supreme Court to intervene. Biden didn’t concede defeat and it looked likely that the final result would not be known for some time.
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“The only thing we know for a fact is that the uncertainty will linger for a while after Trump’s premature announcement and Supreme Court threat,” said Ole Hansen, head of commodities strategy at Saxo Bank A/S. “Most assets classes are selling off while bonds and the dollar have rallied.”
The stakes have never been higher in a presidential election as whoever wins will have the monumental task of leading the U.S. in its fight against a virus that’s claimed more than 230,000 lives in the country and decimated the economy. On a global level, the next president will also play an integral role in shaping domestic as well as international efforts against climate change, the use of fossil fuels and the pace of energy transition.
“Clearly the Blue Wave has not materialized as the polls predicted,” said Wayne Gordon, executive director for commodities and foreign exchange at UBS Global Wealth Management. “The consequence of a Trump victory could be that the fiscal packages come more quickly, but potentially be of a smaller amount.”
During his presidency, Trump took a hard-line stance against major oil producers Iran and Venezuela by means of crippling sanctions, tightening global supplies. His support for American shale producers helped the nation’s output rise to a record, adding more supplies to the global pool.
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A victory by Biden could pave the way for the roll-out of more fiscal stimulus that could lift equity and commodity markets — particularly gold, which benefits from a weaker dollar due to money printing — in the near term. It could also lead to stricter regulation of shale drillers and also signal a detente with Iran, which would unleash millions of barrels a day in fresh crude exports.
Delays to any conclusive result over the next day or so should offer support to the dollar and would pressure prices of commodities, said Vivek Dhar, an analyst at Commonwealth Bank of Australia. “Gold, metals and oil — particularly oil and copper — will be sensitive to those dollar movements.”
See also: Crude Oil Looking to OPEC+ Move More Than Vote Counts
The futures curve for Brent shows there’s still some concern about a potential glut even after increasing signs the OPEC+ alliance will delay easing output cuts as lockdowns are imposed in Europe and Libyan production rises.
“Under Trump, there’s a bigger chance of oil prices rising,” said Fereidun Fesharaki, chairman of industry consultant FGE. “The market has also began to realize that the selloff has been overdone..”
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