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Gold, Copper Climb as Crude Oil Pares Loss on Obama’s Victory

Published: November 7, 2012 | 6:29 am
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Gold and copper advanced, while oil pared losses as Barack Obama was projected to have won a second term as U.S. president, increasing speculation that the world’s biggest economy will extend stimulus and weakening the dollar.

Spot gold gained as much as 0.6 percent to $1,726.57 an ounce and was at $1,722.63 at 1:50 p.m. in Singapore. Copper rose as much as 1.3 percent to $7,798 a metric ton in London, and was at $7,736.25. West Texas Intermediate oil for December delivery pared losses of as much as 1 percent and the Standard & Poor’s GSCI Index of raw materials was little changed at 644.19.

Obama defeated Republican Mitt Romney, according to television-network projections that showed the president winning the electoral-college votes 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.

“Commodities markets appear to be welcoming predictions of an Obama win and a lot of that is linked to the dollar,” Nick Trevethan, senior commodities strategist at Australian & New Zealand Banking Group Ltd., said by phone in Singapore.

The Dollar Index (DXY), a gauge of the U.S. currency against six counterparts, fell as much as 0.4 percent and traded 0.3 percent lower at 80.35. Commodities priced in dollars tend to move counter to the currency.

Romney’s Vow
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 have failed to create jobs.

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.

WTI oil for December delivery was at $88.27 a barrel, down 44 cents, on the New York Mercantile Exchange after dropping as much as 84 cents. Nickel, lead, aluminum, zinc and tin advanced on the London Metal Exchange, while rubber rallied as much as 2.4 percent on the Tokyo Commodity Exchange.

Commodities Advance
Gold’s climb today took gains so far this year to 10 percent and the metal is on course for a 12th annual gain. It’s almost doubled since the end of 2008 over 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.

“There are still other risk events out there, key being the Greek austerity vote today, China’s leadership change process starting tomorrow, as well as China’s economic data over the weekend,” said Trevethan. “Further out, U.S. lawmakers are going to have to deal with the fiscal cliff.”

Obama will need to address the so-called fiscal cliff of more than $600 billion in tax rises and spending cuts that take effect in January unless Congress reaches a budget compromise.

“Monetary policy will remain loose under Obama, so the dollar will be sold,” said Michiyoshi Kato, senior vice president of foreign-currency sales in Tokyo at Mizuho Corporate Bank Ltd., a unit of Japan’s third-largest bank by market value.

businessweek

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