What Will A Trump Victory Mean For Commodity Prices?

Biden’s Withdrawal Shakes Markets: Commodities Set for Upswing as “Trump Trade” Anticipation Grows

Within recent days, the U.S Presidential Election landscape has been thrown into disarray following the surprise announcement by President Joe Biden to withdraw from the race – making him the first sitting commander in chief not to seek re-election since Lyndon Johnson in 1968.

The importance of this unexpected macro event cannot be understated as it is guaranteed to have significant implications on the Commodities markets, with the potential return of the so-called “Trump Trade.”

According to analysts at GSC Commodity Intelligence – the Trump Trade refers to a set of highly profitable money-making trends and market behaviours that emerged during Donald Trump’s previous presidency – as savvy traders positioned themselves to benefit from his “Make America Great Again” policies and economic agenda.

With Biden’s withdrawal and the potential nomination of Vice President Kamala Harris as the Democratic candidate – a long list of the world’s most powerful Wall Street banks have already begun advising “to start rotating into Commodities now” ready to capitalize on the massive uptick in prices ahead.

The big question now is:

What Will A Trump Victory Mean For The Commodity Markets?

In a note to clients, analysts at GSC Commodity Intelligence wrote “that a Trump victory could spur a new super bull in Commodities off the back of a multitude of economic factors, with the most monumental being his stance on tariffs”.

It’s no secret that a big part of Trump’s agenda involves proposing a 60% tariff on U.S imports from China and a universal baseline 10% tariff on imports from all other countries. A move, which could ultimately reignite global inflation – leading to higher Gold and Silver prices.

In fact, during Trump’s previous presidency – Gold price rose substantially, surging from $1,200 an ounce when he took office in January 2017 to over $1,900 an ounce in his final month, which was January 2021.

Also, during Trump’s last presidency, China responded to newly imposed tariffs with a range of economic stimulus measures boosting infrastructure spending. There is no denying that China may respond in the same way again.

This outcome would likely be a ultra-bullish for Commodities such as Aluminium, Copper, Lithium, Nickel, Iron Ore, Zinc and Uranium, which have always historically played a critical roll in China’s infrastructure spending plans.

And last but definitely not least – the risk of new trade wars could fuel an unprecedented phenomenon known as a “Super-Squeeze” in Agricultural Commodities from Soybeans to Corn – sending prices skyrocketing to record highs.

Bottom Line

Whichever way you look at it, one thing is clear. The macroeconomic backdrop for Commodities in the second half of 2024 is looking more bullish than ever before. That’s welcoming news for the bulls, but painful for anyone sitting on the sidelines, who must now decide how much FOMO they can handle.