Metals took a significant hit in the global commodity market following Donald Trump’s victory in the U.S. election on Wednesday. In contrast, oil, gas, and agricultural commodity prices managed to recoup some of their losses.
Trump secured the White House by amassing more than the requisite 270 Electoral College votes. His campaign, filled with intense rhetoric, further polarized the nation.
Oil prices, such as LCOc1 and CLc1, initially dropped by over $2 per barrel due to a stronger dollar but then leveled off. Some analysts and investors believe the initial decline was an overreaction to the election results. Jacob Mandel from Aurora Energy Research pointed out that although Trump has long supported U.S. oil and gas production and might impose hefty tariffs on imports, which could dampen economic growth and fossil fuel demand, U.S. oil and gas production had already reached record highs under former President Joe Biden.
Benchmark European gas prices initially rose slightly before flattening out.
Agricultural commodities rebounded from their earlier lows. Corn and wheat prices increased, and soybeans Sv1 reduced their losses, driven by a sharp rise in soyoil BOv1 futures. A stronger dollar makes U.S. grains more expensive overseas, and Trump’s proposed tariffs could disrupt U.S. agricultural trade, especially for soybeans with leading importer China, which might retaliate by cutting purchases. However, as the peak U.S. soy export season is winding down, the impact of Chinese retaliation may not be felt until next summer. Also, Trump’s promised tariff hikes on all imports could limit the imports of used cooking oil by biofuels producers, thereby boosting the demand for domestically produced soyoil.
Precious metals remained down. Gold prices hit a three-week low on Wednesday, while copper CMCU3 lost nearly 4% and was on track to record its largest intraday loss in five months. Among other metals, zinc CMZN3 was the worst performer in the base metals complex. The galvanizing metal’s prices declined as China’s steel industries could face challenges with Trump’s pledge to boost local U.S. manufacturing. A trader noted that the copper market is factoring in the long-term direction of Trump’s policies.
Trump stated that he would “rescind all unspent funds” under the Inflation Reduction Act (IRA), the Biden-Harris administration’s key climate law aimed at decoupling the global supply chain from China, which includes substantial subsidies for electric vehicles, solar and wind energy, and increasing production of strategic minerals.
Ole Hansen, head of commodity strategy at Saxo Bank, said, “Gold will be torn between the risk of rising inflation, potentially slowing the pace of U.S. rate cuts as tariffs are rolled out, and continued demand for safe haven assets.”
Commodity prices began to fall overnight as traders started to account for the likelihood of a Trump win. Hansen added that this scenario is expected to bring about the promised tariffs on imported goods, particularly targeting China, potentially triggering a new wave of trade tensions and economic disruptions.
Commodity Market Reactions Post Trump’s U.S. Election Win: Metals Slide, Oil and Agriculture See Mixed Fortunes