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Johannesburg - The Gold index on the JSE gained more than 12% in early trade on Wednesday, as investors fled to gold as a safe haven to escape the turmoil on world markets caused when Donald Trump pulled off the biggest political surprise in recent history by winning the US presidential election.
Global equity markets went into a free fall in reaction to Trump’s strong showing in the US elections as investors poured their money into safe havens such as sovereign bonds, the yen and gold. By mid-morning the major indices on the JSE were also sharply down, but the losses were not quite as substantial as on some of the bigger markets.
READ: Trump victory rocks markets
The rand also did better than expected as analysts forecast that a Trump victory would push the currency towards R14.00 per dollar. The unit, which was as strong as R13.18/$ on Tuesday evening, initially dropped more than 5% with other emerging market currencies and in early trade was as low as R13.81, but recovered strongly by mid-morning. At that stage the rand was only 2% down at R13.51.
READ: If Trump wins rand could hit R14/$ - analyst
Gold jumped nearly 5% on Wednesday to its strongest level in six weeks. It marked the metal's biggest single-day gain since June 24, when it rose as much as 8% when Britain decided to leave the European Union. Many experts think a Trump victory could also push the US Federal Reserve to hold off from raising interest rates next month, which will support gold even further.
Gold shares reacted spectacularly and at mid-morning the Gold index was already 12.5% higher, with most of the major gold shares gaining more than 9%. One of the biggest winners was Sibanye Gold [SE:SGL], which surged 11.24% to R40.60; AngloGold Ashanti [JSE:ANG] gained 9.04% to R193.55. Harmony [JSE:HAR] was 10.34% up to R46.33 while Gold Fields [JSE:GFI] lifted 9.91% to R59.99.
Some of the smaller gold shares did even better, with Randgold [JSE:RNG] improving 14.29% to R2.40 and DRDGold [JSE:DRD] trading 12.75% stronger at R2.40.
The rest of the market was supported by the weaker rand, but the All-share index was already 1.32% lower at mid-morning on 50 029 points and the Top 40 index 1.47% down to 43 552 points.
The biggest loser was the Financial index which traded 2.65% softer, while the Industrial index lost 1.84%. The Resources index was however supported by the weaker dollar and gained 0.73%.
The meltdown in global markets is expected to be similar to the fallout after the surprising Brexit vote in Britain earlier this year.
Asian markets dropped sharply and Tokyo's Nikkei index skidded more than 3% to a five-week low. European markets also dropped sharply initially, but by mid-morning were off their lows.
A bloodbath is expected on Wall Street later on Wednesday, as the stock futures in the US were almost 5% down when it became clear that Trump could be the next president of the US. This is worse than the carnage that followed the British vote to leave the European Union in June, which wiped trillions of dollars of value off world markets.
The dollar dropped more than 4% against the yen and more than 2.5% against the euro, while oil prices were also sharply down. The risk of a global trade war likewise hammered currencies across Asia, with the Australian dollar leading the rout.
Markets fear a Trump victory could trigger global economic and trade turmoil and years of policy uncertainty for investors who had been counting on a win by Democrat Hillary Clinton, whose policies were seen as more staid but predictable.
Trump has threatened to rip up major trade agreements and impose barriers in the United States on imports from countries such as Mexico and China, which could reduce trade flows and harm already sluggish global growth.
Among the big dual-listed shares on the JSE Naspers [JSE:NPN] traded 1.80% lower at R2 169.70 and Sasol [JSE:SOL] was 1.01% softer at R367.99, in line with the lower oil price. Richemont [JSE:CFR] took a beating and lost 3.45% to R88.35.
The major banks traded sharply lower. Standard Bank [JSE:SBK] lost 2.78% to R147.00 and Barclays Africa [JSE:BGA] was 2.28% lower at R156.30. FirstRand [JSE:FSR] traded 1.76% softer at R50.85.
