Just like in 2016, the upcoming American elections (November 5, 2024) are far from a foregone conclusion.
The possible impact of a Kamala Harris victory on the commodity markets.
Climate change and renewable energies
An election victory for Kamala Harris could have a significant impact on commodity markets due to her commitment to fighting climate change and renewable energy. An increased focus on clean energy technologies would likely boost demand for the raw materials essential to these technologies, such as copper, lithium and cobalt. Boosting electric vehicles (EVs) and renewable energy storage solutions would require more lithium batteries and would therefore increase lithium demand. On the other hand, this development could have an adverse impact on fossil fuel raw materials, such as coal and oil, since policies could move towards reducing dependence on these energy sources in order to fight against carbon emissions.
Spending on infrastructure and industrial metals
Harris’ policy plan also suggests a surge in infrastructure spending, which would boost demand for industrial metals like steel, copper and aluminum. Infrastructure initiatives, such as building roads, bridges and public transportation networks, require enormous quantities of these materials. Large infrastructure projects, for example, could lead to a surge in demand for steel to the benefit of large steel groups, and cause prices to rise. Iron ore is an essential raw material used in the steel industry.
Trade policies and agricultural raw materials
Changing trade policies under a Harris government could impact commodity prices around the world by changing trade relationships. Changing existing trade agreements or imposing new tariffs could affect the flow and prices of agricultural commodities like corn, wheat and soybeans. Additionally, changing subsidies and environmental regulations could impact agricultural production and prices. Tighter environmental regulations, for example, could reduce the use of certain fertilizers, impacting crop yields and, consequently, market prices.
The possible impact of a Trump victory on the commodity markets.
Energy sector and fossil fuels
A re-election of Donald Trump could cause different dynamics in commodity markets, particularly in the energy sector. Policies favoring deregulation and support for domestic production could boost traditional fossil fuels like oil, natural gas and coal. This approach could lead to an increase in supply at the national level, and therefore a fall in prices due to greater availability. This policy could, however, have a negative impact on renewable energy-related commodities, as attention could shift away from clean energy investments.
Metals, mining and infrastructure
Trump’s policies could also impact the metals and mining sectors. Deregulation of the mining sector could increase the supply of different materials and their availability to the industry. At the same time, planned infrastructure spending could boost demand for metals like steel and copper. For example, if the government implements its massive infrastructure projects, demand for steel could jump, to the benefit of steel producers.
Agricultural policies and trade relations
Trade policies under Trump could have a significant impact on agricultural commodities, particularly regarding trade relations with China. Trade deals or tariffs could change agricultural export flows and impact prices of commodities such as corn and soybeans. A change in biofuel requirements could further impact these markets, as corn is one of the main inputs for ethanol production. A pro-biofuel stance could boost demand for corn and cause prices to rise.
Market reactions to election results
Precious metals and geopolitical uncertainty
Geopolitical uncertainty often drives demand for safe haven precious metals, such as gold and silver. If market participants perceive an increase in geopolitical risk, for example, we could see a rush on gold pushing its price higher. This response has been seen in past periods of uncertainty, with gold prices surging as investors sought safety in troubled times.
Commodity markets and the US dollar
Both election scenarios have broader implications for the commodities market as a whole, primarily through their influence on the US dollar. Fiscal and monetary policies will have an influence on the dollar, with an indirect effect on commodity prices. A stronger dollar generally raises the price of raw materials for buyers using other currencies, which could reduce demand. Conversely, a weaker dollar could boost demand for U.S. commodities.
Both possible election scenarios could push the dollar lower initially, but the direction will be determined by monetary policy relative to growth and inflation prospects.
In summary
A Kamala Harris election victory would likely boost demand for raw materials used in renewable energy, such as copper, lithium and cobalt, while reducing reliance on fossil fuels like coal and oil. Its infrastructure plans would also increase demand for industrial metals like steel, copper and aluminum. A change in trade policies and environmental regulations could impact agricultural commodities like corn and soybeans. Conversely, a Trump re-election could favor traditional fossil fuels through deregulation and support for domestic production, which could increase supply and lead to lower prices. His policies could also increase demand for industrial metals and impact agricultural exports through trade deals. Both election results could impact precious metals, with geopolitical uncertainty boosting demand for safe havens such as gold. Additionally, the fiscal and monetary policies of either government will impact the strength of the dollar, which will indirectly influence commodity prices.
