Gold, silver slump sends Africa’s top stock market to biggest fall since 2020

South African equities tumbled in volatile trading on Monday, at one point posting their sharpest decline since March 2020, as a brutal selloff in precious metals rippled through the market.

The FTSE/JSE All Share Index, Africa’s most valuable stock market benchmark, fell as much as 6.1 percent before paring losses to about three percent by 10:22 a.m. in Johannesburg, according to Bloomberg. Shares of precious-metals miners led the rout, with the sector index plunging 11 percent.

Heavyweight miners, including Gold Fields, AngloGold Ashanti and Valterra Platinum were among the biggest drags on the broader market.

The selloff snapped sentiment in a market that had just capped an 11-month record rally and was fueled by a sharp reversal in precious-metals prices. Gold slid as much as 10 percent on Monday to briefly trade around $4,400 an ounce, after surging to nearly $5,600 in January. Silver plunged as much as 16 percent, extending a record 26 percent slump recorded on Friday.

Losses moderated as the session progressed, with the benchmark index clawing back more than half of its intraday decline about an hour and twenty minutes into trading, as bargain hunters stepped in.

“The rebound following the sharp selloff is primarily driven by bargain hunters looking to capitalize on the volatility,” said Lester Davids, an analyst at Unum Capital, in comments to Bloomberg.

A powerful commodities rally had underpinned South African equities over the past year, helping the market outperform many emerging-market peers. The benchmark index is up 58 percent in dollar terms over the past 12 months, compared with a 38 percent gain for the MSCI Emerging Markets Index.

Despite the rally, valuations remain relatively subdued, with Johannesburg stocks trading at about a 30 percent discount to other developing-market peers.

While mining stocks have driven much of the gains, investors have increasingly pointed to banks, retailers and industrial firms as potential next-stage beneficiaries. Still, analysts warn that the market may struggle to sustain its outperformance without continued support from miners, which carry significant weight in South Africa’s main equity index.