VANCOUVER (miningweekly.com) – With the pall of political uncertainty lifted once president-elect Donald Trump won the US presidential elections Tuesday night, the US now enters a period of market uncertainty over what economic, financial and political policies will characterise the next administration.

The immediate market impact as the election result became clear was a knee-jerk reaction in Asia, where investors were scrambling to buy gold bullion and safe-haven assets, pushing spot prices up nearly 5% on Wednesday to the strongest in six weeks.

US equities futures traded limit down, implying a 5% fall at the opening of the markets. According to Thomson Reuters GFMS, the CBoE VIX index (sometimes referred to as the ‘Fear’ index) rose by 40%.

The Mexican peso plummeted by over 13%, with silver in local terms testing the high that had been posted twice this year already, back to February 2013 levels. Mexico is the world’s largest silver producer with 21% of world mine production.

Gold initially added $45 at its peak to reach $1 337/oz, a gain of 4.3% against the LBMA Gold Price PM fix for Tuesday.

MARKET REBOUND

Among the world's four major gold producers, which accounted for 38% of 2015 world mine output, the market gain represented a three-month high in renminbi, and seven-week highs in Australian dollars, roubles and US dollars, GFMS stated in a market update.

“This all happened during Asian hours, when, as one analyst commented, Asia was ‘freaking out’ in what was a classic knee-jerk reaction to a significant event.”

In the following few hours, and ahead of the US markets’ opening, conditions calmed, with the VIX coming off the top, the equity futures markets regaining some ground and gold meeting profit taking Asia, as well as some producer sales, into the price strength. Gold also failed at an important technical level, stopping at the downtrend line that dates back to the record highs of 2011.

On Wall Street, the S&P 500 index had hit its highest level in a month – just as defeated Democrat presidential nominee Hillary Clinton was giving her concession speech, in New York. The index had gained 1% since trading opened, touching levels last seen in early October.

The Dow Jones industrial average rose about 200 points in midday trade before holding about 140 points higher.

The US dollar surged the most since Brexit. The dollar clawed back its earlier 2% loss after being abandoned by investors who flocked to safe-haven currencies, including the Japanese Yen and the Euro, overnight. It was up by 0.35% by midday in an unexpected swing after initial fears that Trump's victory would have a similar effect on the currency market as the Brexit vote did.

“Certainly president-elect Trump appeared to adopt a more conciliatory tone in his initial remarks than in the oh-so-combative presidential election campaign, but the markets will need more guidance before they can settle.

“In the short term, therefore, further volatility and risk-off activity could easily prompt further gains in the gold price, while for the longer term the picture is more hazy, but points overall to further bullish action. [However], this is more likely to be on the basis of bargain hunting into dips rather than a headlong pursuit of higher prices,” GFMS stated.