[Asia Economy Reporters Hyunjin Jung, Boryeong Geum] The global commodity market cannot remain unaffected by the US presidential election. With inflation beginning due to the impact of large-scale economic stimulus measures, commodity prices are expected to rise, and the outcome of the US election is also widely anticipated to influence oil and gold prices. In the bond market, expectations for rising interest rates are growing as Joe Biden is predicted to win.
According to CNBC and others on the 22nd (local time), Goldman Sachs stated in a report that the commodity market will show strength next year due to inflation and other factors. The S&P Goldman Sachs Commodity Index, composed of 24 raw materials, is expected to yield a 28% return over the next 12 months, with energy including oil projected to rise 42.6%, precious metals including gold 17.9%, and industrial raw materials such as copper 5.5%.
The market also evaluates that the commodity market falls within the influence of the presidential election. After the November election, uncertainty may increase, leading to a sharp rise in demand for safe assets such as gold and US Treasury bonds, and a greater need for hedging against inflation.
Another factor to consider is that supply and demand forecasts may vary depending on the policies of the elected president. Goldman Sachs expects commodity prices to strengthen if Biden wins the presidency. Forbes actually noted that based on Biden’s proposed policies, if he becomes president, US crude oil production is expected to decrease by about 800,000 to 1 million barrels annually compared to President Donald Trump until 2025, and costs will rise due to environmental policies such as daily production limits. An increase in oil prices is inevitable.
The bond market is also stirring. Expectations for large-scale economic stimulus have led to forecasts of economic recovery in the US and rising long-term interest rates, expanding the spread between long- and short-term rates. In the New York bond market, Treasury yields have already risen. The 10-year US Treasury yield surpassed 0.860% intraday on this day. It is the first time in about four months since early June that the 10-year Treasury yield has exceeded 0.8%.
However, the pace of interest rate increases is expected to be more limited than anticipated. The Blue Wave effect may not appear immediately after the election. Gong Dong-rak, a researcher at Daishin Securities, said, "In the bond market, there are opinions that some bonds should be purchased in advance based on the political uncertainty expected to unfold after the election."
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