Raw materials and the companies that produce them were sent into turmoil as Donald Trump was poised to become the U.S. president in a shock victory over Hillary Clinton.
Oil, industrial metals and agricultural commodities plunged on Wednesday while gold surged with safe-haven assets, as the Republican was set to to pull off a huge electoral upset and march into the White House after winning states including Florida, Ohio, North Carolina and Pennsylvania. Traders rushed to unwind bets they piled into over the past two days amid predictions that Democrat Clinton would sweep to an easy victory. Shares of gold miners jumped while those of energy companies across Asia slid.
A Trump presidency promises to reshape the relationship of the U.S. with the world, and the potential for unpredictability in American policy is fueling speculation the Federal Reserve will refrain from raising interest rates. Global financial markets were in tumult on the brink of the billionaire businessman’s victory, with gold rallying the most since Britain’s surprise vote to leave the European Union sent shock waves through markets in June.
“The commodities sphere is in complete turmoil at the moment,” said Will Yun, an analyst at Hyundai Futures Corp. in Seoul. “If Trump wins, an era of uncertainty will be introduced as there will be a paradigm shift in the U.S. and all risky assets including commodities are in for a decline in the long run. Gold, silver and platinum will play their roles as a safe haven. The impact will be much larger and longer than Brexit.”
U.S. West Texas Intermediate oil dropped as much as 4.3 percent to $43.07 a barrel on the New York Mercantile Exchange, while Brent crude slid 3.6 percent to $44.40 on the London-based ICE Futures Europe exchange. Bullion for immediate delivery jumped as much as 4.8 percent to $1,337.38 an ounce, according to Bloomberg generic pricing. The Bloomberg Commodity Index, a measure of raw material returns, was down 0.3 percent.
A Trump victory could signal a boost for gold to as much as $1,400, according to Bloomberg Intelligence analyst Mike McGlone, as his promises to renegotiate trade deals and curb immigration may introduce geopolitical instability.
Australian gold miners surged with Newcrest Mining Ltd., the nation’s largest producer, jumping 9.8 percent, the most in five months. Saracen Mineral Holdings Ltd. added 15 percent while Northern Star Resources Ltd. climbed 10.5 percent.
Australian oil and gas producer Santos Ltd. dropped 7.5 percent, the most since May. Beijing-based China Petroleum and Chemical Corp., the world’s biggest refiner known as Sinopec, slumped 4.6 percent in Hong Kong trading.
Copper lost as much as 2.3 percent to $5,115 a metric ton on the London Metal Exchange, while nickel plunged as much as 3.8 percent. Wheat, corn and soybean futures on the Chicago Board of Trade slumped at least 1.1 percent. The U.S. is the world’s largest exporter of corn and soybeans. A Trump win would put pressure on agricultural commodities because of his anti-trade sentiment, according to Bloomberg Intelligence’s McGlone.
“Markets are having a knee-jerk reaction as they always do during times of high uncertainty like elections,” said Peter Lee, an analyst at BMI Research. “The victory of either candidate is not expected to have a big impact on markets like oil. It’s inevitable that there’s a rush to safer assets, and money will flow to sectors like gold and less risky options. We’re expecting to see a lot of volatility ahead, it may or may not be fundamentally driven.”
Futures on the S&P 500 plunged more than 4 percent and Mexico’s peso — which tends to weaken as Trump’s prospects improve — sank by the most in two decades. Treasuries and the yen soared by the most since the vote for Brexit.