From the October 01, 2012 issue of Futures Magazine • Subscribe!

Energy’s countdown to the election

Global trends are gold standard for metals

Only marginal changes resulting from the U.S. elections are expected to appear in base metal markets, which currently are being driven more by global trends, mainly in Europe and China, according to traders and analysts. But precious metals may move more as a result of monetary easing.

The prospects for U.S. federal fiscal restraints resulting from possible expiration of tax cuts and automated spending cuts two months after the election likely will keep clarity from appearing in the markets at least until sometime early next year, says David L. Abramson, director of research with BCA Research. 

“The fiscal issues pretty much rule out any big positive,” he says. “No matter who wins the election, there is still fiscal uncertainty at least until January or February. So for the remainder of the year the U.S. is really not going to be a huge positive to offset the negative in Europe and China.”

Edward Meir, independent commodity analyst with INTL FC Stone, says that if Romney wins, the stock market is likely to rally and could pull up some of the commodity markets, although he’s reluctant to project that will happen, noting that many things could occur before November.

“We have a problem with slow growth practically around the world, so that means we’re not looking at a big bull market in any of these commodity markets any time soon,” Meier says. “Gold is going to be a bit more resilient because of the easing concerns and pump priming and all that. But the base metals are going to be on the defensive, flat to down over the next six to nine months until we get out of this slump.”

In terms of the GOP platform plank on studying the return to a gold-backed currency, none of our analysts saw it as a serious proposal.

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