Commodities Daily - November 3, 2020

> Oil advances thanks to upbeat global manufacturing PMIs and ahead of US elections. Brent is hovering below $39/bbl as we write, with today's main focus being US election day. US factory orders for September and October vehicle sales data are among the macro releases of most interest to oil investors today. We believe that a decisive victory for either candidate, but particularly Biden, would be positive for oil. The results will be announced tomorrow morning. Today, we expect Brent to maintain positive momentum and overcome resistance at $39.3/bbl, which would pave the way to $40.1/bbl. Should the positive momentum reverse, the $37.9/bbl support level would come into view.> Gold rises toward $1,900/oz mark with US presidential elections expected to generate elevated volatility. If gold is able to break above its recent range, we see the first technical hurdle for gold being the $1,912/oz mark (it has already cleared previous resistance at $1,887/oz), with a break above likely leading to a gain to $1,931/oz. Under a negative scenario, meanwhile, a fall below $1,887/oz could signal a continuation of the downtrend toward the $1,859-1,872/oz technical range.OIL ADVANCES THANKS TO UPBEAT GLOBAL MANUFACTURING PMIS AND AHEAD OF US ELECTIONSBrent slid to as low as $35.7/bbl at the start of yesterday's Asian trading session but made gains during US trading hours and climbed to $39.3/bbl overnight. It settled yesterday at $38.97/bbl, up $1.03/bbl on the day. The initial trigger came from the IHS Markit Chinese manufacturing PMI for October, which came in at 53.6, highlighting that Chinese economic growth continues to accelerate amid the country's success in containing the coronavirus. This was followed by an upbeat eurozone manufacturing PMI, which climbed to 54.8 in October from September's 53.7, mainly driven by Germany. This also highlighted a further divergence between sectors, as the eurozone service industry faces contraction amid the second wave of the virus. New lockdowns in Germany, France and now Italy also suggest that at least some manufacturing capacity will be curtailed this month.The icing on the cake for oil bulls yesterday was the US ISM manufacturing PMI for October coming in at a very strong 59.3 versus 55.4 in September, showing that activity accelerated way more than the expected 56 reading. The coronavirus crisis has boosted demand for goods, with the new orders index bouncing to a 16-year high. However, the outlook is uncertain, as a recent resurgence in coronavirus cases across the country could lead to restrictions being reimposed as winter approaches, which could crimp manufacturing activity. Furthermore, government economic aid for businesses and workers hit by the pandemic has dried up, while new fiscal stimulus talks remaining on hold. Another positive for oil yesterday came from Russia's energy minister, who has held talks with domestic oil companies to delay crude output increases planned for January. Reuters, citing knowledgeable sources, reported that three options have been discussed: extending the current cuts into 1Q21, increasing oil output in January as planned, and cutting output even further. Brent is hovering below $39/bbl as we write, with today's main focus being US election day, pitching Donald Trump against Joe Biden. US factory orders for September and October vehicle sales data are among the macro releases of most interest to oil investors today. We believe that a decisive victory for either candidate, but particularly Biden, would be positive for oil. The results will be announced tomorrow morning. Conversely, a closely contested election would likely shift investors away from risk assets such as oil amid fears of the result being disputed, perhaps leading to many months of bitter wrangling in the Supreme Court. A result with split party control, such as Biden winning and the Senate staying Republican, would throw more doubt on the prospects for a fiscal relief package and would be moderately bearish for oil. Today, we expect Brent to maintain positive momentum and overcome resistance at $39.3/bbl, which would pave the way to $40.1/bbl. Should the positive momentum reverse, the $37.9/bbl support level would come into view.GOLD RISES TOWARD $1,900/OZ MARK WITH US PRESIDENTIAL ELECTIONS EXPECTED TO GENERATE ELEVATED VOLATILITYAfter trading near the $1,875/oz mark early yesterday, gold prices began to generate positive momentum, rising to $1,895/oz at the end of the day. Support came from the very upbeat DM manufacturing PMIs, which raise the specter of inflation (thus boosting the appeal of gold as a store of value). This morning, cautious optimism is prevailing in global markets. Markets appear to be positioning for a decisive victory by Joe Biden in the US presidential election. Polling has shown that Biden has widened his lead over the incumbent Trump in recent weeks. A decisive victory for Biden is the most favorable scenario for markets, given that this would reduce the likelihood of the outcome being contested in court, a scenario could trigger a period of political instability in the US and would likely lead to a selloff in risk assets. Under this negative scenario, we struggle to see gold receiving strong support on safe-haven buying. It could even come under pressure as risk assets selloff, which has already occurred on numerous occasions this year.The initial results of the election may start coming in early tomorrow morning Moscow time, but the final result could take several days. Note that slight deviations from polling data in only a few swing states could push the result in either direction. However, if Biden is able to win decisively - meaning that he sweeps the key battleground states (particularly Florida), the result will be known tomorrow morning. In this case, tomorrow could see a strong rally in both risk assets and gold on the prospect of additional vast fiscal stimulus in the US. At the moment gold sits just above the middle of an $80/oz price range that has coalesced since September. Given the attention the US election has received from traders, we think gold will likely break out of this range by the end of the week. What appears to be the most likely scenario is a move higher on a Biden victory. We see the first technical hurdle for gold being the $1,912/oz mark (it has already cleared previous resistance at $1,887/oz), with a break above likely leading to a gain to $1,931/oz. Under a negative scenario, meanwhile, a fall below $1,887/oz could signal a continuation of the downtrend toward the $1,859-1,872/oz technical range.