The US election, Covid & Commodities

As we head into the final quarter of a year that many may wish never happened, the global pandemic will continue assert a major influence on the performance of different sectors: from energy and metals to agriculture. With the pandemic still developing and a vaccine probably months away, the only thing that remains certain is the uncertainty. It will continue to create volatile and unpredictable market conditions, while geopolitical risks add another layer – not least considering what lies ahead, with the US Presidential election on November 3 probably much closer than what the polls can measure.

Never in history have global interest rates been pushed so hard towards zero across so many countries simultaneously, with massive increases in fiscal deficits on top of historically high debt levels in the global economy. Add to this government attempts to support growth through the spending of money that needs to be printed first, and the outlook for precious and some industrial metals continues to look supportive into Q4 and beyond. 

The combination of central banks actively supporting the return of inflation and the potential for the dollar to weaken further remains key to our general bullish outlook for commodities, especially those that historically have helped preserve wealth during times of raised uncertainty and inflation.

The year to mid-September performance among some key commodities tells a story about strong demand for precious metals amid the global collapse in rates and the rising risk that inflation will emerge to render government bonds already trading near zero or below useless as a means of safe haven.