U.S. Dollar, Gold, and Commodities: How Trump’s Re-election Could Reshape Markets

Shaping the U.S. Energy Landscape:

The U.S. energy sector has experienced significant shifts in policy direction between the presidencies of Donald Trump (2017-2021) and Joe Biden (2021-present). Trump's administration emphasized “energy dominance” with deregulation and increased production, while Biden's approach has been more climate-focused, balancing fossil fuel production with environmental commitments. This comparative analysis delves into how each administration’s policies have influenced crude oil and natural gas production, rig counts, and commodity markets. We also assess potential impacts if Trump secures a second term in 2024, with a special focus on the U.S. Dollar Index, gold, silver, cotton, guar gum, and soybeans.

Crude Oil Production: (Diverging Strategies and Production Trends) When Trump took office in 2017, U.S. crude oil production was around 8.87 million barrels per day (bpd). His "energy dominance" strategy led to record-high production, peaking at 12.9 million bpd in November 2019. Trump’s administration averaged approximately 11.2 million bpd through extensive deregulation, federal land leasing, and streamlined infrastructure for projects like the Keystone XL and Dakota Access pipelines. These measures included rolling back environmental regulations and opening nearly 10 million acres for energy production, encouraging growth in key shale basins like the Permian.

In contrast, Biden assumed office in January 2021 with an initial crude production level of 11.15 million bpd. Despite Biden’s climate-focused policies, production has gradually risen to 12.55 million bpd by October 2023. Though Biden initially imposed a moratorium on new oil and gas leases, rising global demand partially lifted the ban in 2022. Biden’s policies, however, have reintroduced strict methane regulations, which increased operational costs but align with his climate agenda. Additionally, Biden’s Strategic Petroleum Reserve (SPR) releases in 2022, totaling over 180 million barrels, helped stabilize fuel prices, highlighting a balance between energy security and environmental goals.

Natural Gas Production: (Different Paths, Strong Demand)

Both Trump and Biden presided over periods of strong natural gas production, though with varying approaches. Under Trump, natural gas output rose from 27.7 billion cubic feet per day (Bcf/d) in January 2017 to 33.3 Bcf/d by December 2019. Trump’s deregulation efforts and active support for LNG (liquefied natural gas) export infrastructure doubled LNG exports, especially to Europe and Asia.

Biden’s policies, driven by global demand and the energy crisis stemming from the Russia-Ukraine conflict, have sustained strong production, reaching 32.3 Bcf/d by October 2023. However, Biden’s administration has implemented stricter methane regulations, raising costs for producers. Nevertheless, Biden has supported LNG exports as a “bridge fuel” for the renewable transition, enabling the U.S. to meet European energy needs while adhering to climate goals.

Rig Counts: (Reflecting Each Administration’s Priorities)

The contrasting energy policies are also evident in the rig counts. Under Trump, the crude oil rig count climbed from 542 rigs in January 2017 to 883 by the end of 2018, driven by deregulation and access to federal land. Trump’s natural gas rig count averaged around 150 due to technological advances that sustained production with fewer rigs.

Biden’s administration has maintained stable but lower rig counts, averaging around 500 for crude oil and 100-120 for natural gas. The focus has been on optimizing existing operations under a regulatory environment that prioritizes climate goals, slowing the drive for new drilling.

Potential Impact of a Trump Re-Election on U.S. Energy and Commodity Markets

If Trump wins the 2024 election, his anticipated deregulation policies could lead to a surge in oil and gas production. Analysts predict that crude oil output could exceed 13 million bpd under Trump, with additional federal land leases and relaxed regulations boosting output. Natural gas production might rise to 35 Bcf/d with expanded LNG export capabilities. Rig counts for crude oil could increase to around 800, while natural gas rigs might approach 200, spurred by favorable regulatory conditions.

Alternatively, if Biden’s policies continue, crude oil and natural gas production may stabilize or experience moderate growth driven by global demand. Rig counts are likely to plateau, with a focus on sustainability over aggressive expansion, as Biden’s climate policies align with renewable energy transition goals.

U.S. Dollar Index: (Reacting to Early Election Results)

The U.S. Dollar Index surged by 1.9% to a four-month high on news of Trump’s early electoral lead. Market optimism surrounding Trump’s pro-business and expansionary fiscal policies has strengthened the dollar. Historically, Trump’s policies—such as tax cuts, tariffs, and energy expansion—bolstered the dollar by attracting foreign capital inflows and improving trade positioning. If Trump’s victory is confirmed, analysts expect the Dollar Index to test resistance levels around 108-110, a high last seen in early 2023, with potential upward momentum as markets anticipate economic growth.

Gold Prices: (Stability Amidst Political Uncertainty)

Gold prices have remained stable amidst the unfolding election results, with spot gold currently at $2,726 per ounce. With Trump’s lead raising expectations of fiscal policy shifts, gold could gain as a safe-haven asset in the event of increased deficit spending and geopolitical volatility. Analysts expect gold to reach short-term levels around $2,750 to $2,800 per ounce, potentially testing resistance near $2,850 if uncertainties persist. Federal Reserve policies on interest rates could also play a role in influencing gold prices moving forward.

Silver: (Dual Benefits from Political and Industrial Demand)

Silver, closely following gold, trades at approximately $34.10 per ounce. Given its industrial applications, silver could see a bullish trend if Trump’s fiscal stimulus policies drive demand. If market volatility persists, silver might test levels around $35.00 to $36.00 per ounce, with further gains possible if industrial demand surges due to infrastructure projects.

Cotton Markets: (U.S. and Indian Prices Reacting to Trade Policy)

Trump’s protectionist stance could affect U.S. cotton exports. ICE cotton futures for December 2024 are currently around 70.22 cents per pound, with resistance at 72.50 cents and support near 68.00 cents. If trade restrictions are reintroduced, domestic supplies could increase, putting downward pressure on prices. For India, Trump’s policies may support Indian cotton as global demand shifts. MCX cotton futures are trading around ?55,500 per candy, with potential upward movement to ?57,000 if global buyers seek alternatives to U.S. cotton.

Guar Gum: (U.S. Fracking Activity Drives Indian Exports)

Trump’s potential re-election could boost U.S. demand for guar gum from India, essential for hydraulic fracturing (fracking). During Trump’s first term, U.S. crude production reached a peak of 12.9 million bpd, significantly driving demand for guar gum, of which India supplies about 80%. If fracking activity intensifies, Indian guar gum exports could rise to 130,000-140,000 metric tons, potentially raising prices from ?12,000 to ?13,500 per quintal. However, tariffs could impact costs.

Soybean: (Positive Momentum from Trade and Domestic Demand)

A Trump re-election could drive soybean prices higher due to potential tax cuts, increased domestic demand, and trade dynamics. U.S. soybean prices on the Chicago Board of Trade (CBOT) currently hover around $13.30 per bushel. Favorable policies could push prices to $14.50-$15.00 per bushel. Enhanced U.S.-China trade relations might further strengthen U.S. market share in Chinese imports, creating bullish momentum.

Future Implications of Energy Policies

The U.S. energy landscape has been shaped by distinct priorities under Trump and Biden. Trump’s administration maximized production and deregulation, while Biden’s balanced approach focused on sustainable energy and regulatory oversight. A Trump re-election in 2024 could reinvigorate oil and gas production, with potential bullish impacts on the Dollar Index and commodity prices. Conversely, a continuation of Biden’s policies would sustain production with an environmental focus, influencing markets in alignment with climate goals. Together, these contrasting approaches underscore the complexities of balancing energy security and environmental priorities in U.S. policy.