US elections impact global markets and commodities – APM Capital

Democrats Win:
The impact on oil markets looks mixed from a Democrat win perspective. On the one hand, markets would expect a Democratic administration to push for green energy initiatives, potentially leading to stricter regulations on fossil fuels. This could reduce U.S. oil production, tighten global supply, and potentially raise oil prices.

However, they are viewed as being more likely to adopt a more diplomatic approach to foreign policy, potentially easing tensions with countries like Iran, compared with Trump’s combative stance with Iran. This could lead to increased global oil supplies if sanctions are lifted, putting downward pressure on oil prices. Furthermore, Democrats are seen as being more likely to embrace stronger climate change policies that could accelerate the transition away from fossil fuels, affecting long-term oil demand expectations and potentially leading to lower prices in the future. Indeed, these policies could well impact GCC economies which are heavily reliant on oil and are particularly sensitive to changes in US energy policy and global oil prices.

Gold often performs well following a US Presidential election, regardless of the president’s party. However, we often see significant peaks during Republican presidencies due to economic uncertainty and geopolitical tensions. Democratic presidencies generally see more stable or declining gold prices as economic stability improves.

A Democratic win might lead to expectations of increased fiscal spending on social programs and infrastructure. This could raise concerns about inflation, prompting investors to buy gold as a hedge, driving up its price.
Indeed, when it comes to monetary policy, a Democratic administration would more likely support continued stimulus measures, this could weaken the U.S. dollar, making gold more attractive to investors and pushing its price higher.
Another factor which might come into play would be the political uncertainty concerning a close or contested election. If the election results are contested, this could lead to significant political turmoil which would lead to gold spiking as a safe-haven asset.

Republicans Win:
Overall, oil markets would most likely welcome a Republican administration for several reasons. Firstly, it would likely favour deregulation of the energy sector, potentially leading to increased U.S. oil production, and while this boost to production may add downward pressure on prices, the policy stance of Republicans prioritising fossil fuel industries and delaying the transition to renewable energy would maintain a higher oil demand, supporting higher prices. This policy stance is evident from Donald Trump recently telling Senate Republicans that he would restart oil drilling in Alaska’s Arctic National Wildlife Refuge, reversing Biden’s move to cancel leases in the region.

Then there’s Donald Trump’s often belligerent attitude to US foreign policy. A more aggressive stance on foreign policy might lead to increased geopolitical tensions, particularly with oil-producing countries like Iran or Venezuela. This could disrupt global oil supplies and push prices higher.

So, with Republicans typically supporting the fossil fuel industry and pursuing policies that maintain or increase oil production in the U.S., this may lead to lower global oil prices which would also affect Middle Eastern economies. However, a focus on traditional energy could still benefit the region by maintaining demand for oil and gas exports.

Expectations are that gold markets would react well to a Republican victory. One reason for this would be a perceived stronger dollar. Republican administrations typically pursue policies that strengthen the U.S. dollar which would put gold prices under pressure as a stronger dollar makes gold more expensive for investors holding other currencies.

Also, Trump’s previous tenure as president was marked by a lot of political upheaval and uncertainty, both domestically and abroad. This uncertainty will certainly make gold look more attractive as a safe-haven asset.

Last Updated on 5 months by News Desk 1