Bloomberg News

Gold, Copper Lead Gains in Commodities as Obama Wins Second Term

November 07, 2012

Gold and copper advanced after Barack Obama won a second term as U.S. president, entrenching prospects for continued stimulus in the world’s biggest economy and weakening the dollar.

The Standard & Poor’s GSCI Index of raw materials climbed as much as 0.5 percent to 647.66. Gold advanced to $1,731.82 an ounce in London, the highest in more than two weeks, while copper rose as much as 1.4 percent to $7,806.25 a metric ton.

Obama defeated Republican Mitt Romney, securing at least 303 electoral votes, with 270 needed for victory. The S&P GSCI Index is little changed this year as investors weigh stimulus from the world’s central banks including the Federal Reserve against a global slowdown and impact of Europe’s debt crisis.

“The outcome of the U.S. election increases the probability that the ultra-expansionary monetary and fiscal policy will continue, which puts pressure on the U.S. dollar and gives buoyancy to commodity prices,” Eugen Weinberg, head of commodities research at Commerzbank AG in Frankfurt, said today in a report.

The Dollar Index (DXY), a gauge of the U.S. currency against six counterparts, declined 0.2 percent to 80.453. Commodities priced in dollars tend to move counter to the currency.

Obama’s victory erases a question mark that has shadowed the U.S. economy and the Fed all year as the U.S. central bank presses on with a program of quantitative easing to spur growth and cut joblessness. Romney had vowed to replace Fed Chairman Ben S. Bernanke when his term ends in 2014 because “the amount of currency that he’s created” with his purchases of Treasuries and other debt securities has failed to create jobs. The U.S. jobless rate rose to 7.9 percent in October, according to a Labor Department report on Nov. 2.

Fed’s Purchases

The Federal Open Market Committee on Oct. 24 affirmed plans to buy $40 billion of mortgage-backed securities each month without specifying the total size or duration of the purchases. In two previous rounds of bond-buying, the Fed bought $2.3 trillion in securities and has swapped short-term Treasuries with longer-term securities in a program called Operation Twist.

Gold has gained 10 percent this year and is poised for a 12th annual advance. It’s almost doubled since the end of 2008 in Obama’s first term in office. The S&P GSCI Spot Index, which tracks 24 raw materials, has climbed 85 percent since the start of 2009, while copper in London and crude oil in New York doubled in the period.

Nickel, lead, aluminum, zinc and tin advanced on the London Metal Exchange, while rubber rallied as much as 1 percent on the Tokyo Commodity Exchange. West Texas Intermediate crude for December delivery was at $87.79 a barrel, down 92 cents, on the New York Mercantile Exchange after dropping as much as $1.09.

“An Obama win favors a continuation of the current easy- money policy,” Axel Merk, president and chief investment officer at Merk Investments LLC, wrote in an e-mail. “The Fed’s increased emphasis on employment is here to stay.”

To contact the reporters on this story: Glenys Sim in Singapore at gsim4@bloomberg.net; Lananh Nguyen in London at lnguyen35@bloomberg.net

To contact the editors responsible for this story: James Poole at jpoole4@bloomberg.net; Stephen Voss at sev@bloomberg.net


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