Commodities Under Pressure as Investors Factor in Trump's Win in U.S. Presidential-Race

Commodities, including oil, metals, and grains, saw a decline on Wednesday, pressured by a stronger U.S. dollar as investors increasingly priced in a victory for Donald Trump in the U.S. presidential election. Fox News reported that Trump has secured the 270 electoral votes necessary to win over challenger Kamala Harris, though other outlets have not yet officially declared him the winner.

In Asian trade, oil, soybean, and copper prices dropped by 1.5% and over 2%, respectively, reflecting the dollar’s rally. However, precious metals, such as gold, remained steady.

“This is the initial response in the commodity markets to the early results from the U.S. vote counting that are favouring Trump,” said Ole Hansen, head of commodity strategy at Saxo Bank. “The primary concern is that a potential ‘Trump 2.0’ administration could lead to increased tariffs on Chinese goods, which would negatively impact metals markets, especially since China is a major consumer of copper, iron ore, and steel. Oil prices are also down due to fears about global economic growth as tariffs could harm global demand,” he added.

If Trump wins, China’s industrial metals and steel sectors might face further challenges. The former president has suggested imposing a 60% tariff on Chinese goods to boost U.S. manufacturing, a move that could put downward pressure on China’s steel prices and lead to further losses for domestic steelmakers.

The global oil market could also face disruptions if Trump’s administration intensifies sanctions on Iranian oil exports, which currently total around 1.3 million barrels per day.

For agriculture, the impact on U.S. soybean exports to China is a concern. If Trump imposes new tariffs on Chinese goods, Beijing may retaliate with tariffs on U.S. soybeans. While China has reduced its reliance on U.S. soybeans, the oilseed remains the largest agricultural export from the U.S. to China.

Gold, on the other hand, has held steady after reaching a record high of $2,790.15 last Thursday. As a safe-haven asset, gold typically performs well during times of geopolitical and economic uncertainty, especially in low-interest-rate environments.

The Federal Reserve’s two-day monetary policy meeting begins on Wednesday, and it is expected to implement another 25-basis-point rate cut. However, a Trump victory could complicate the U.S. rate outlook, with inflationary pressures potentially stemming from his policies.

“While money markets are fully anticipating a 25bps rate cut, they might avoid sending a dovish message, given that Trump’s policies are seen as inflationary,” said Matt Simpson, senior analyst at City Index. “This could weigh on gold in the short term, but any pullback is likely to be limited as gold will maintain its safe-haven appeal during the early days of a Trump presidency.”

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