Analyse the potential effects of the US presidential election on global commodities, focusing on energy, metals, and agriculture. Understand the influence of policy direction and geopolitical uncertainty.

Potential impact of a Kamala Harris election win on commodities markets

Climate change and renewable energy

A Kamala Harris election win could significantly influence commodities markets through her commitment to climate change and renewable energy. An increased focus on clean energy technologies would likely boost demand for key commodities, such as copper, lithium, and cobalt.

For example, the push for electric vehicles (EVs) and renewable energy storage solutions would increase the need for lithium batteries, thus elevating lithium demand. Conversely, this shift may negatively impact fossil fuel commodities like coal and crude oil as policies might aim to reduce reliance to combat carbon emissions

Infrastructure spending and industrial metals

Harris's policy stance suggests a boost in infrastructure spending, driving demand for industrial metals, including steel, copper, and aluminium. Infrastructure projects, such as building new roads, bridges, and public transit systems, require vast quantities of these materials. For instance, large-scale infrastructure projects could increase steel demand, benefiting major steel producers and potentially driving up prices. Iron ore is a key commodity used in steel production

Trade policies and agricultural commodities

Changes in trade policies under a Harris administration could impact global commodity prices by altering trade relationships. Modifications in trade agreements or new tariffs could impact the flow and pricing of agricultural commodities like corn, wheat , and soybeans.

Furthermore, changes in subsidies or environmental regulations could influence agricultural production and pricing. For example, stricter environmental regulations might reduce the use of certain fertilisers, affecting crop yields and subsequently impacting market prices.

Potential impact of Trump's re-election on commodities markets

Energy sector and fossil fuels

A Trump re-election could lead to different dynamics in commodities markets, particularly in the energy sector. Policies favouring deregulation and support for domestic production could boost traditional fossil fuels like oil, ​natural gas, and coal.

This approach might increase domestic supply, potentially lowering prices due to higher availability. However, this stance could negatively impact renewable energy commodities, as focus might shift away from clean energy investments.

Metals, mining, and infrastructure

Trump's policies could also affect metals and mining sectors. Deregulation in mining could increase the supply of various metals, making them more available for industrial use. Simultaneously, proposed infrastructure spending plans could drive demand for metals like steel and copper.

For example, if the administration follows through on massive infrastructure projects, steel demand could surge, benefiting companies in the steel production industry.

Agricultural policies and trade relations

Trade policies under Trump could significantly impact agricultural commodities, especially concerning trade relations with China. Any trade agreements or tariffs could alter the flow of agricultural exports, influencing prices for commodities like corn and soybeans.

Additionally, changes to biofuel mandates could impact these markets, as corn is a primary feedstock for ethanol production. A supportive stance on biofuels might increase corn demand, driving up prices.

Market reactions to election outcomes

Precious metals and geopolitical uncertainty: geopolitical uncertainty often boosts demand for precious metals like goldand silver as safe-haven assets. For instance, if market participants perceive increased geopolitical risks, there might be a rush to buy gold, driving its price up. This reaction was noted during past uncertain periods when gold prices surged as investors sought safety amid turmoil

Commodity markets and the US dollar: both election scenarios have broader implications for the commodities market, primarily through their influence on the US dollar. Fiscal and monetary policies will impact the dollar, indirectly affecting commodity prices. A stronger dollar usually makes commodities more expensive for buyers using other currencies, potentially reducing demand. Conversely, a weaker dollar could boost demand for US commodities.

There is a case for both election outcomes to initially weaken the US dollar; however, the direction will be dictated by monetary policy relative to growth and the inflation outlook.

In summary

A Kamala Harris election win would likely boost demand for commodities used in renewable energy, such as copper, lithium, and cobalt, while reducing reliance on fossil fuels like coal and oil. Her infrastructure plans could also increase demand for industrial metals like steel, copper, and aluminium. Changes in trade policies and environmental regulations could impact agricultural commodities like corn and soybeans.

Conversely, a Trump re-election might favour traditional fossil fuels through deregulation, potentially increasing supply and lowering prices. His policies could also drive demand for industrial metals and influence agricultural exports through trade agreements.

Both election outcomes could impact precious metals as geopolitical uncertainty boosts demand for safe-haven assets like gold. Additionally, fiscal and monetary policies under either administration will affect the US dollar’s strength, indirectly influencing commodity prices.

Potential impact of a Kamala Harris election win on commodities markets

 Source: IG