Commodity prices plummeted on Wednesday as US elections ended in a victory for Donald Trump, causing investors to flock to the safe-haven dollar.
Investors viewed Trump’s policy stance as supportive of near-term economic growth, TreasuryONE currency strategist Andre Cilliers said, as his policies tended to favour deregulation and lower taxes. This was evidenced by a surge in US stock futures as investors prepared for a more business-friendly administration.
However, investors also anticipate that a Trump presidency could bring geopolitical disruptions, as well as potentially inflationary policies, such as tax cuts and tariff hikes.
Investec chief economist Annabel Bishop said: “A rise in risk aversion resulted in rand weakness, while the US dollar gained, both on safe haven flows and anticipated higher inflation in the US, leading to a shallower US rate cut cycle, with limitations now on further US interest rate cuts.”
At 5.20pm, the rand weakened by 1.63% to R17.66135/$, but was stable against the euro at R18.93893/€.
With risk-averse investors turning back to the dollar, the price of gold dropped back below the $2,700/oz level, giving back some of its record gains.
At 5.20pm, the price of gold was down 2.85% at $2,665.46/oz, with silver down 4.42%. Platinum also fell by 2.63% to $972.20/oz while palladium was down 3.33%.
According to Ninety One chief sustainability officer Nazmeera Moola, a Republican victory could see the US retreat from all global climate initiatives, including those supporting critical mineral value chains.
“The Republican victory opens the door for tax credits for EVs to be rescinded,” said Moola, which could negatively affect critical mineral companies — particularly in the platinum group metals (PGM) sector. “However, the proposed tariffs will provide some insulation for US EV producers from cheaper Chinese competitors.”
Amid falling commodity prices, the JSE all share index was 1.64% weaker at market close, with mining companies leading the losses.
Sibanye-Stillwater, Impala Platinum, Anglo American Platinum, Harmony Gold, Gold Fields, AngloGold Ashanti and DRDGold were among the 10 worst-performing shares.
While losses were seen across all major indices, the most significant drops were in the mining sector, with resources down 4.4%, while precious metals and mining lost 6.4%.
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