How the 2020 presidential election could influence the price of gold

October 27, 2020

How the 2020 presidential election could influence the price of gold

All eyes in the investing world are turning to the 2020 presidential election on November 3, a date that will undoubtedly have an effect on the price of gold USD. What if Donald Trump wins? What if Joe Biden takes the W in two weeks? How will gold’s price take shape in the weeks and months and years after this vital election?

To help you parse through the various scenarios that could take place, we broke down this timely post into three sections:

  • What if Donald Trump wins reelection?
  • What if Biden wins the White House not the Senate?
  • What if Joe Biden wins the White House and the Senate?

Scenario 1: What happens to the price of gold if Trump wins again in 2020?

In short, we're short-term bullish and long-term bullish on the price of gold if Trump wins. His presidency will invigorate the sluggish stock market, and his proposed tax cuts and hopeful stimulus package could help shoot up the gold price. Some major U.S. businesses are also going through a V-shaped comeback in how they’re performing financially, despite a second wave of the pandemic currently ravaging dozens of U.S. states.

Looking at Trump’s potential impact on gold and the dollar, some analysts believe that a second Trump term could be just as rewarding as the first when it comes to the gold price.

It’s helpful to recall how gold performed during the first Trump presidency term. In January 2017, the currency metal stood at US$1,210, and there was a fresh all-time of more than US$2,000 set during his presidency.

 By the end of September, gold had added roughly 54 percent to its value under the Republican leader.

 

A Trump victory would also further increase prices of “safe havens such as gold,” other analysts noted, adding how the Brexit vote to leave the European Union might have provided a template on how the commodities market may react to a Trump victory.

“The surprise result of the June referendum undermined the prices of industrial commodities,” including oil , which at first fell by around 5%, and copper which fell about 3%, “while boosting the price of gold,” which initially climbed by 5%, the analyst said.

What could be useful to note is how the price of gold USD has been affected by the pandemic, encouraging many precious-metals specialists to speculate that a banner year for gold could continue under a second Trump term.

Scenario 2: What if Biden wins the presidency but not the Senate?

The price of gold USD would undoubtedly fluctuate if Biden took the White House but not the Senate. Trump’s tax policies will likely remain, and Biden’s hands could be tied. This may keep the markets on a steadier course, as the shifts will be less pronounced, and uncertainty could be reduced. Biden’s reign is expected to be calmer and less unpredictable compared to Trump.

Biden would be more likely to ease trade relations with China and lift various sanctions on foreign countries. This would be helpful to the stock market and to the American dollar but more likely to reduce demand for gold.

Scenario 3: What if Biden takes the presidency and the Senate?

It’s no secret that if Biden wins, he’ll go ahead with his commitment to enacting sweeping changes to regulation and taxes. He favours a greener economy, so he is not a friend to the mining industry.

Biden’s regulatory changes could include a $1.7 trillion climate policy and a $1.3 trillion infrastructure improvement plan. These measures would be useful for improving the future of the country, but would increase the national debt at a time when it’s already quite high. He is also expected to bring in corporate and capital gains tax hikes and industry regulation, which could place additional strain on the value of the dollar, which would be bad for US stocks, but positive for the price of gold USD.

“Wall Street would not welcome lifting taxes, especially during the fragile recovery from the economic crisis. So, the stock market could tank, if Biden wins,” notes OilPrice.com, and it’s apparent that a depressed stock market could spell a win for gold investors.

Remarking on his spending plan, an analyst interviewed by Kitco commented: “U.S. government debt is already larger than U.S. GDP and this will add to the ever-growing pile. This could see further upside for gold if it leads to a weaker U.S. dollar.”

If there is any gold price surge on a Biden presidential victory and a Democrat win in Congress, that increase could be temporary, other analysts report.

“We think the initial move higher could prove to be short-lived as a Democratic sweep in November could also clear the way for front-loaded fiscal stimulus, boosting the near-term growth outlook and likely driving higher yields on the margin.”

Then there’s the oddball scenario of a contested election, which may be a closer reality than in any other presidential election thanks to Trump undermining the integrity of mail-in ballots. It’s a dicey situation, because what if Donald Trump wins or what if Joe Biden wins and the election results are disputed deep into 2021? Uncertainty will wreak havoc with the stock market, and in that kind of chaos the price of gold USD often shoots up amid high demand and even supply.

But there’s a caveat in all this: Crystal-balling how gold will shift isn’t an exact science. We all recognize how many surprises Donald Trump can pull out of his pocket so who knows what’s in store for Americans and the price of gold USD in the coming months. And with the ages of both presidential candidates seeping into the high 70s, more uncertainty swirls around their health and capability to run the country if one of them gets elected.

As the gold price faces an uncertain future ahead, you might be curious about the idea of buying gold, but be sure you work with an experienced gold seller such as GBS who can share their insight and knowledge of this industry with you.

If you have questions about gold, silver or investing in gold, contact us anytime.



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