SINGAPORE/LONDON, Nov 6 (Reuters): Commodities from oil and gas to metals and grains dropped on Wednesday as the dollar rallied and victory for Republican Donald Trump in the US presidential election stoked concerns about tariffs and economic growth.
Trump recaptured the White House by securing more than the 270 Electoral College votes needed to win the presidency, following a campaign of dark rhetoric that deepened the polarization in the country.
Oil prices fell by nearly 3 per cent, on pressure from the U.S. dollar rally, which was set for its biggest one-day rise since March 2023 against major peers.
Brent crude oil futures were down $2.12, or 2.8 per cent, at $73.41 per barrel by 1317 GMT, while U.S. West Texas Intermediate (WTI) crude fell $2.18,or 3.03 per cent, to $69.81 per barrel.
Investors believe a Trump presidency will bolster the dollar as interest rates may need to remain high to combat inflation resulting from any new tariffs and polices that may further pressure China's economy, weakening demand there.
The dollar was set for its biggest one-day rise since March 2020 against major peers as so-called "Trump trades" took off.
A stronger U.S. dollar makes greenback-denominated commodities such as oil more expensive for holders of other currencies.
Independent analyst Tina Teng said that besides a surging dollar weighing on commodity prices, a Trump presidency could see policies that may further pressure the Chinese economy, weakening oil demand in the world's top crude importer.
Weakening demand signals also weighed on oil on Wednesday, said Phillip Nova, senior market analyst Priyanka Sachdeva in a note, after data from the American Petroleum Institute data showed U.S. crude inventories grew more than forecast.
Precious metals also fell, with gold sliding to a near three-week low, while copper lost more than 2 per cent, making it the worst performer of the base metals complex.
Investors in gold were also turning their attention to the next Federal Reserve policy meeting, seeking clues on the pace of interest rate cuts. The prospect of several rate cuts had been underpinning bullion's stunning rally this year.
Spot gold was down 1.5 per cent to $2,703.93 per ounce at 1152 GMT. Bullion hit a record high of $2,790.15 last Thursday.
US gold futures were down 1.3 per cent to $2,713.60.
"Gold will be torn between the risk of rising inflation, potentially slowing the pace of US rate cuts, as tariffs are rolled out and continued demand for safe haven assets," Ole Hansen, head of commodity strategy at Saxo Bank, said.
Spot silver fell 2.6 per cent to $31.80 per ounce. Platinum shed 2 per cent to $979.65 and palladium was down 2.9 per cent to $1,044.75. All three metals hit their lowest level in three-weeks.
Commodity prices started to fall overnight as traders started to price in the likelihood of a Trump win.
"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," Hansen added.
However, Trump could renew sanctions on Iran and Venezuela, removing oil barrels from the market, which would be bullish, said UBS analyst Giovanni Staunovo. Iran exports about 1.3 million barrels per day.
Benchmark European gas prices also fell by nearly 3 per cent amid concerns about gas supplies and Trump's stance on the Middle East conflict and Russia-Ukraine war.
China's industrial metals and steel industries could face headwinds as Trump has pledged to impose blanket 60 per cent tariffs on Chinese goods to boost U.S. manufacturing.
"China's steel prices will undertake more downward pressure if Trump wins the election, and domestic steelmakers may face even more severe losses," said Ge Xin, deputy director at Lange Steel Research Centre.
"This is because Trump will be more aggressive in terms of measures against China."
The copper market was pricing in the possible roll-back of U.S. electrification initiatives, including subsidies for electric vehicles, which would dampen demand.
Agricultural commodities were also hit, with soybean futures in particular trading lower. Wheat and corn were seen as less exposed to renewed trade tensions with China.
A stronger dollar makes US grain more expensive overseas, while tariffs proposed by Trump could disrupt U.S. agricultural trade, with soybeans particularly reliant on sales to leading importer China.
There are also fears that China could respond with retaliatory measures, potentially reducing U.S. exports of key crops and creating downward pressure on prices.
Shares in European clean energy companies also fell as Trump has vowed to scrap offshore wind projects through an executive order on his first day in office.
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