Oil dropped while gold fluctuated after U.S. President Donald Trump said that he tested positive for COVID-19 with just one month left until the U.S. presidential election.
Brent slipped to the lowest since June. In New York, West Texas Intermediate crude futures slumped as much as 5.4 per cent. Cocoa touched a five-week low, while spot silver rose as much as 1.7 per cent.
A Bloomberg gauge of raw-materials spot prices had already fallen about four per cent 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. The Bloomberg Commodity Total Return Index fell to its lowest in seven weeks before paring losses on renewed hopes that Congress will pass a U.S. stimulus package.
“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.
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.
‘Short-Term Confusion’
Gold traded little changed, with strength in the dollar limiting demand for the metal as an alternative asset.
“Gold is being caught at the moment between a stronger dollar and safe-haven demand, pulling and pushing in a relatively narrow band,” said Janet Mirasola, managing director at Sucden Futures. “Headline Covid fears will continue to cause a bit of short-term confusion.”
Spot gold slipped 0.2 per cent to US$1,901.51 an ounce at 11:55 a.m. in New York, paring earlier gains of as much as 0.6 per cent.
While prices have fallen from August’s record high, gold 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.
Soft commodities were also under pressure, with cocoa futures falling to the lowest since Aug. 24 in New York. Coffee reached the lowest since July before erasing losses.
Adding to the economic gloom was U.S. payrolls data that missed expectations. Nonfarm payrolls increased by 661,000 in September, versus a median estimate of an 859,000 gain.
“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.
--With assistance from Ranjeetha Pakiam and Sharon Cho.
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