JOHANNESBURG – Oil dropped while gold edged higher after President Donald Trump said that he tested positive for Covid-19 with just one month left until the U.S. presidential election.
Brent slipped as much as 4.8%, to its lowest level since June. The global crude benchmark helped drag raw materials lower, with crop futures falling and copper earlier touching a seven-week low. A Bloomberg gauge of commodity spot prices had already fallen about 4% from an early September peak amid a pickup in virus cases around the world, and Trump’s positive result fuels more uncertainty over the election.
“A risk-off event in a market that was already softening due to concerns over fundamentals doesn’t leave much to hang onto in the short-term,” said Paul Horsnell, head of commodities research at Standard Chartered.
Crude demand has been struggling to recover amid a resurgent coronavirus, while supply from the Organization of Petroleum Exporting Countries and its allies continues to rise. Russia raised its crude and condensate production last month, while Saudi Arabia’s oil exports jumped to a four-month high in September. Although, total output from the oil-producer group was steady last month as the United Arab Emirates pulled production back sharply in atonement for recent months of oversupply.
Trump contracting the virus has sharpened focus on how the outcome of the election could impact oil markets, said Bjarne Schieldrop, chief commodities strategist at SEB AB. A win for Democrat Joe Biden could lead to a renewed nuclear deal with Iran and restrictions on fracking, Schieldrop said, potentially curbing future U.S. crude output.
Metals and Crops
Spot gold was up 0.1% at $1,907.87 an ounce, paring an earlier jump after Trump’s announcement. Silver rose 0.7%.
Bullion has rallied this year as central banks pumped vast amounts of stimulus into economies to curb the damage from the pandemic. While prices have fallen from August’s record high, the precious metal is still being supported by low interest rates, a resurgence in Covid-19 cases in some parts of the world, and the heightened uncertainty heading into the U.S. elections.
Copper added 0.6% to $6,427 a ton on the London Metal Exchange, rebounding from an earlier 1.9% drop to the lowest since mid-August. Prices have come under pressure in recent weeks as rebounding exchange stockpiles soothed concerns that robust Chinese demand is fueling a supply shortage.
Soft commodities were also under pressure, with cocoa futures falling as much as 2.5% to a five-week low in New York and coffee reaching the lowest since July. Sugar declined 1.6%.
Investors are also awaiting the monthly non-farm payrolls data due Friday. Bloomberg Economics analysts don’t expect the September report — the last national tally released before Americans head to the polls — to be consequential enough to tilt the election outcome.
“Trump and the coronavirus news, along with the setback to the talks on the U.S. stimulus package, are just triggers and they’re serving as a reminder that the global economy is in trouble at least for the next six months,” said Vandana Hari, founder of Vanda Insights in Singapore.