Oil at lowest level since August while gold rallies

Brent crude, the international marker, dropped as much as 3.6 per cent to the lowest since August, hitting $44.40 a barrel, while US benchmark West Texas Intermediate fell more than 4 per cent to a low of $43.07.

Other commodities were also under pressure, with coffee, cocoa and sugar all dropping between 1 and 1.5 per cent.

Precious and base metals were stronger, however, with the former boosted by investors looking towards traditional safe havens while the latter reversed early losses on the back of optimism about increased infrastructure spending in the US, which Mr Trump made a central part of his victory speech.

Gold gained as much as 4.9 per cent to a high of $1,337.40 a troy ounce, its biggest one-day gain since the UK’s Brexit vote in June, carrying the precious metal to its loftiest level in two months.

“Gold’s jump shows the shock hitting financial markets worldwide,” said Adrian Ash of BullionVault, a UK-based online gold exchange.

He noted gold’s overnight advance had lagged behind the post-Brexit jump but that could change. “A Trump victory today is only where the uncertainty and panic in other assets begins.”

Copper jumped 3 per cent to a 16-month high of $5,443 a tonne. The metal has entered a bull market this week, rising more than 20 per cent since its lows in January after lagging other metals for much of the year.

Investors had largely positioned ahead of the election for Mrs Clinton win, but were sideswiped by the US electorate that handed Mr Trump victory.

S&P 500 futures fell 5 per cent, triggering an automatic trading halt designed to curb excessive moves. The Mexican peso suffered its biggest one-day fall in more than 20 years, dropping more than 13 per cent to a record low of 20.7 against the dollar.

Wayne Gordon, a commodity and currency strategist at UBS in Singapore, said that a Trump victory could lead to a period of risk aversion in commodities lasting several days, but the underlying fundamentals of the market would not be significantly altered in the short term.

“For clients concerned about risk we’ve been recommending they buy gold, as it performed well in the immediate aftermath of Brexit,” Mr Gordon said.

“But this is really a risk-off move rather than a broader change in the underlying fundamentals of these commodities. Both candidates are pro US growth.

“When the dust settles here we’re still likely to have a deficit of oil from the second half of next year; and the drop in oil prices – and broader economic uncertainty – may actually force greater co-ordination in Opec ahead of their meeting later this month. This may make it more likely that they formulate a deal.”

Oil prices have fallen more than 15 per cent since hitting a year-high of $53.73 a barrel in early October, shortly after Opec reached a provisional agreement to cut oil production and try and speed the rebalancing of a heavily oversupplied market.

Hedge funds and other investors have been losing faith in Opec’s ability to secure the deal, however, with members such as Iraq raising objections over how their production is assessed, while Nigeria and Libya’s strife-hit output has recovered in recent weeks.

Key for many commodities in the coming weeks could be the response of the dollar, with many of them priced in the US currency. The euro rose 1.75 per cent against the dollar.

Mr Gordon at UBS cautioned that while the dollar was under pressure on Wednesday morning, if markets remain volatile it could start to benefit if investors flee from riskier assets.