In November commodities remained largely unchanged month-on-month. In this context, our first reference index the Bloomberg Industrial Metals subindex [BCOMINTR Index] was down – 1.19% over the month, and our second reference index the Bloomberg Commodity Index [BCOMTR Index] ended the periods at +0.41%.
The most noteworthy development over the month was, unsurprisingly, the outcome of the US elections. The process concluded more swiftly than anticipated at times, resulting in a sweeping victory for the republicans, also winning a majority in the House of Representatives and Senate. Trumps’ stances on energy, international trade (i.e. tariffs, retaliations) and geopolitics are keeping investors on their toes. The USD and yields have risen, and the equity market is breaking new records while Europe is lagging, with France and Germany in political turmoil.
Energy benefited from a rally in Natural Gas while industrial and precious metals were in negative territory over the month. Agriculture was up thanks notably to the stellar performance of coffee.
INDUSTRIAL METALS
The Industrial metals complex was in negative territory over the month, despite some positive signs of economic recovery coming from China. In the US, NFP surprised to the downside and both the outcome of the US elections, and a higher dollar weighted on prices throughout the month. Lead, Zinc and Nickel were posting positive figures in November while Copper and Aluminium were down.
PRECIOUS METALS
The complex was the biggest loser in November, as the Republican sweep erased all anticipated uncertainty, which was detrimental for all precious commodities regarded as a safe heaven.
EX-BENCHMARK METALS
The complex was in negative territory over the month. All ex-benchmark metals positing negative performances over the period.
BIOBASED
The biobased complex was well in positive territory with both lumber and ethanol posting positive performances over the period.
A FEW WORDS ON THE US ELECTION OUTCOME
The uncontested election of Donald Trump introduces significant uncertainties, particularly regarding financial markets and commodities. The recent gains of the USD have placed short-term pressure on the prices of metals (precious, industrial or ex-benchmark) as well as biobased materials.
We believe there are more secular bullish factors at play important to keep in mind, and notably the growing mistrust in the US dollar. The implementations of sanctions following Russia’s invasion of Ukraine as well as the threats by Trump of 100% tariff on BRICS nation if they try to replace the USD are illustrations of how the currency can be used as a bargaining chip by the US in the case of a quarrel. Unsurprisingly, central banks may very well be more and more inclined in pursuing stocking up on gold.
Additionally, Trump’s subsequent actions are expected to have a limited effect on the US low-carbon technology policies. This impact is anticipated to be further constrained by the autonomy of individual US states, as well as support from both the private sector and government entities.
The structural factors influencing transition materials prices, are primarily driven by the energy transition and digital transformation (the US are far behind China). These factors are expected to reassert themselves strongly, providing upcoming bullish price support due to significant structural imbalances in supply and demand.
We don’t believe the election of Donald Trump can undermine the secular trends that support transition materials.