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Industrial metals were volatile on Wednesday as the US presidential election looked set to dash hopes of a sweeping, climate-focused stimulus package.

Heading into the contest, copper and aluminium were buoyed by the prospect of a Democratic sweep of the White House and Congress that could unleash a wave of fiscal stimulus — with a focus on “green” infrastructure.

Joe Biden proposed $2tn of spending in the next four years to decarbonise American electricity by 2035 on the way to hitting net-zero carbon emissions by 2050.

But those hopes faded as state-by-state results came out, with the Republican party enjoying some key victories that increased its chances of holding on to the Senate, while the presidential race was still too close to call.

John Norman, head of cross-asset fundamental strategy at JPMorgan, summarised the early results as “unclear on the next president, but fairly clear that he’ll face Congressional resistance on anything transformational, whether on the budgetary or regulatory front”.

Copper for delivery in three months on the London Metal Exchange fell as low as $6,670 a tonne before recovering to $6,820 as the US dollar gave up earlier gains. The metal traded at $6,855 before the polling stations opened. Elsewhere, Aluminium hit $1,854 a tonne before rallying to $1,889, down 0.2 per cent on the day.

The chances of a so-called blue wave, where Democrats gained control of the White House and both houses of Congress, are now “slim to none,” said Stephen Brennock of PVM, a London-based brokerage.

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“Political deadlock in Washington is set to be a familiar theme, as are continued delays to any agreement on a new fiscal stimulus package,” he added.

Heading into the US election, analysts were touting the most supportive macro backdrop for base metals in a decade, as strong demand from China — which has just announced a net zero emission target — and the prospect of a Democrat clean sweep brought the green agenda to the fore.

In anticipation, hedge funds and other money managers increased their bullish bets on US-traded copper, which is used in everything from wind turbines to electric vehicles, to the most since early 2018.

Tyler Broda, analyst at RBC Capital Markets, said a Republican-controlled Senate was likely to lead to a stronger dollar and a reduction of US inflation expectations — which had been elevated by the expectation of a big economic stimulus.

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The boost to inflation-adjusted interest rates “would be bad for gold and all metals prices,” he added. Gold prices have risen by a quarter this year as collapsing real yields have reduced the attraction of holding government bonds.

The precious metal was down 0.1 per cent on Wednesday at $1,906 a troy ounce. A stronger US dollar also makes gold, and other commodities, more expensive for buyers holding other currencies.

“Commodities are likely to be controlled in the short term by US dollar swings,” said Natalie Scott-Gray, Senior Metals Analyst at StoneX.

Colin Hamilton, analyst at BMO Capital Markets, said many of the factors that had helped drive copper up from its March lows of around $4,300 a tonne and other base metals like nickel were still intact in spite of the US election.

These included strong demand from China, where the government’s pledge to be carbon neutral was starting to drive policy decisions.

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