Commodities, from oil to metals and grains, slid on Wednesday as the dollar strengthened, with investors increasingly pricing in a Donald Trump victory in the U.S. presidential election.
Trump has secured the 270 electoral votes needed to claim victory over challenger Kamala Harris, according to Fox News, although other news organizations have yet to declare him the winner despite his lead.
Oil, soybean, and copper prices fell by about 1.5% and more than 2% respectively in Asian trade, pressured by the U.S. dollar rally. Precious metals, including gold, held steady.
“This is the initial response in commodities markets to U.S. vote counting and early results favouring Trump,” Ole Hansen, head of commodity strategy at Saxo Bank, told Reuters.
“The main focus is that, in a potential ‘Trump 2.0’ scenario, we are likely to see tariffs on Chinese goods, which is negative for metals with China being a major consumer of copper, iron ore, and steel. Oil is down on worries over economic growth as tariffs are not good for overall global demand,” he said.
China’s industrial metals and steel industries could face challenges if Trump returns to office. Trump has pledged to impose 60% tariffs on Chinese goods to boost U.S. manufacturing.
“China’s steel prices will face downward pressure if Trump wins the election, and domestic steelmakers may suffer further losses,” said Ge Xin, deputy director at Lange Steel Research Centre. “This is because Trump will take more aggressive measures against China.”
Global oil supplies could face disruptions if a Trump administration tightens sanctions on Iranian oil exports, which amount to about 1.3 million barrels per day.
“Trump may support Israel in adopting a tougher military stance against Iran, which could raise the risk of military escalation and impact supply in the region,” said Saul Kavonic, senior energy analyst at MST Marquee.
For agriculture, Beijing may respond with retaliatory tariffs on U.S. soybeans if Trump imposes new tariffs on Chinese goods. While China has reduced its reliance on U.S. soybean imports, the oilseed remains the largest U.S. agricultural export to China.
Spot gold held steady after reaching a record high of $2,790.15 last Thursday. Gold is seen as a hedge against geopolitical and economic uncertainties and typically performs well in a low-interest-rate environment.
The Federal Reserve begins a two-day monetary policy meeting on Wednesday and is expected to deliver another 25-basis-point rate cut, though a Trump win could complicate the U.S. rate outlook.
“While money markets fully expect a 25bp cut, and one seems likely this week, they probably won’t want to send a dovish message with any cut, given Trump’s policies are considered inflationary,” said Matt Simpson, senior analyst at City Index. “That could weigh on gold in the near term, though any pullback is likely to be shallow as gold will retain its safe-haven appeal in the early days of a Trump presidency.”
(Reuters)