Gold climbed over $1 900 and copper fell as investors awaited the final outcome of the US Presidential election, with Joe Biden on the brink of taking the White House from Donald Trump, but Republicans likely to maintain their hold on the Senate.
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 US fiscal stimulus package, the trajectory of the dollar and appetite for risk.
Bullion rose past its 50-day moving average as the US dollar fell amid improving risk sentiment, with investors beginning to price in a Biden presidency. The dollar weakness also helped boost crop prices.
“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.
Congressional Democrats face a loss of leverage in negotiations over a new US stimulus package, over the roughly $2-trillion that had been discussed by the Trump administration before the November 3 election. With a potential “blue wave” off the table, bond traders are pricing in less fiscal support, sending Treasury yields reeling.
Copper drifted lower, along with most other metals, as uncertainty over the outcome of the presidential election contributed to light volumes in Asian and early European trading hours.
At a fundamental level, investors are weighing the toll that new lockdowns -- aimed at curbing the spread of the virus -- 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
New York cocoa rose to the highest in nearly a week, amid lingering political uncertainty in top grower Ivory Coast.
The US 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 US exports while concern lingers that dryness will hurt output in rival shipper Brazil.
US 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.