Non-oil commodity prices on the move

The possible implications of a Trump presidency in the United States are spurring notable movements in other commodities such as gold and oil, apart from oil.
The possible implications of a Trump presidency in the United States are spurring notable movements in other commodities such as gold and oil, apart from oil.PHOTO: REUTERS

The possible implications of a Trump presidency in the United States are spurring notable movements in other commodities apart from oil.

Copper, in particular, has put in a stellar showing. Prices soared to a 17-month high following the Nov 8 election, and were up 18.6 per cent as at last Friday since the start of the year.

The surge was fuelled largely by hopes that more spending in the US - as promised by President-elect Donald Trump - would lead to higher demand.

But Ms Aurelia Britsch, head of commodities at BMI Research (Singapore), expects to see prices of industrial metals - including copper - come down in the coming weeks as "Trump's ambitious infrastructure plan will disappoint expectations".

"Our medium-term outlook for industrial metal prices remains positive, and we believe China, and not the US, will continue to support metals via steady fiscal spending channelled to the infrastructure sector," said Ms Britsch.

But gold - known widely as Mr Trump's favourite metal - has not done as well, particularly after US Federal Reserve chairman Janet Yellen last week signalled a stronger case for a December rate hike.

Gold spot prices have slid 5.8 per cent since the election to around US$1,204.05 as at last Friday.

Ms Britsch expects gold prices to head lower going into the first half of next year.

"Trump's stated plans for aggressive fiscal expansion during his term mean that the expected trajectory for US rates has shifted significantly higher," she said. "Anticipation of a steeper rise in US interest rates will encourage liquidation of gold investments and keep prices under pressure."

As for soft commodities, Religare Capital Markets research director Nirgunanvm Tiruchelvam believes palm oil prices are likely to rise sharply.

"Trump's protectionist policies are negative for emerging market currencies such as the Malaysian ringgit. When the currency that a commodity trades in weakens, the commodity prices rise," he noted.

Mr Tiruchelvam added that he is positive on stocks with exposure to palm oil, such as plantation shares. This would include Singapore-listed Golden Agri-Resources and Wilmar International.

Jacqueline Woo

A version of this article appeared in the print edition of The Straits Times on November 21, 2016, with the headline 'Non-oil commodity prices on the move'. Print Edition | Subscribe