Update: 10/28/2020

Gold and silver today are down today amid the news around a strengthening US Dollar. Bob Haberkorn, the senior market strategist at RJO Futures said “The metals were so dependent on more stimulus at this point and the bear camp is fully in control right here. Overall, the gold market is lower on a strengthening dollar due to the lack of stimulus measures and risk-off mentality heading into this election.” However, the volatility that faces gold and silver still does not erase the fact that both metals are up significantly this year. Gold alone is up about 25% so far. On the other hand, gold and the election also are being watched simultaneously by investors. The four main scenarios that can occur may all lead to higher gold prices in the long-term, according to Kitco, are:

  • a Democratic sweep,
  • a Trump victory,
  • a divided Congress,
  • or a contested election.

Even though all these scenarios will potentially create a positive environment for gold, one could be explosive for gold and silver prices. Pepperstone head of research Chris Weston believes a blue wave at the polls. “What is the scenario which drives up inflation expectations, brings the Fed in to keep long-term borrowing costs low and makes real rates go down to 2%. If you can work out which is the quickest scenario to get there, that will be the most bullish one for gold. And that, to me, looks like a blue wave,” Weston said. He also mentioned this was because of a greater likelihood that a massive stimulus could break through Congress, which can weaken the dollar.

All other possible situations would cause a slow-burn for the gold price on the positive side. A Trump victory is good for gold because of trade wars, budget deficits, and geopolitical uncertainty. A divided Congress or a contested election would most likely yield civil unrest. Consequently, civil unrest is always a trigger for a bullish gold environment. Therefore, you can only expect gold and silver prices to continue up despite a stronger dollar.

Gold and the Election

After the chaotic debate between Trump and Biden on Tuesday, the global market is responding. Stocks, gold and the election are all connected with each other, more so than you might first imagine. As we move through the final weeks before the election, investors might be feeling uncertain about what to expect. Should you sell gold or buy gold coins and bullion? Actually, according to data that dates back to when the US abandoned the gold standard, we can see a pattern for where gold and silver prices today will most likely move. 

The Data for Gold and the Election

Previous decades of elections have data that mostly show a trend with gold and the election. According to TV station Komo, the gold prices tend to rally in September before the election. Afterward, the gold price tends to slide until January after the election. Here’s how the gold price moved during the month of September. 

September Gold and the Election

 

Gold slipped and fell below $1900 in September, however, it is on its way up once again. This could be partly owing to the Trump-Biden debate on September 29th. Similarly, October saw mixed trading for gold and silver based on the debates, the strengthening US Dollar, and generally positive economic news despite the rise of COVID-19 cases.

October Gold and the Election

 

As early as September 28, the Wall Street firm warns investors to expect increasing stock market volatility. Most notably, UBS drew this conclusion because of Trump’s assertion that there will be no peaceful transition of the presidency and he will contest the results on Election Day if he loses. UBS, therefore, is currently advising clients to turn to safe havens because this uncertainty will definitely weigh on the stock market. Many collectors may soon buy gold coins and bullion, which will, in turn, raise the gold and silver prices today

Election years mostly show that gold usually has peaks followed by a brief decline, but mostly healthy growth after the election. 

 

This holds true because after George W Bush was reelected in 2004, the gold price increased by about 7%. Next, Obama won in 2008 and the gold price climbed 17.8% at the end of the year. After Trump was elected in 2016, the gold price actually dropped in November and December. Immediately following the election, however, the gold price spiked by nearly 5%.

 

Investing in an Election Year

Whenever you are dealing with any kind of investing, the election will definitely cause economic shockwaves. But because everyone has different takes on what the future election will bring, large groups of people will act in response altogether, especially in the economy. Their reaction and predictions are often what will contribute to the gold and silver prices today simply because of demand. Some may sell gold while others will buy gold coins and bullion. However, here’s some long-term research about the performance of gold and the election. 

When Trump was elected in 2016, people feared the stock market would crash. Likewise, investors worried about the same thing when Obama was first elected. These claims belie the fact that in both elections, the stock market did well. According to Bespoke Research, the DJIA’s average gain since 1900 is about 4.8% each year, and regardless of the election results, the markets tend to do well. Other trends to consider though are during the average Republican administration, there are gains of 3.5% per year in the market. On the other hand, Democratic administrations see about 6.7% of growth per year.

2020 Economy and US Election

2020 is one of the most eventful years many of us have ever experienced. The pandemic, economic uncertainty, rising US-China tensions, and the election have made this year nothing short of volatile. Because of this uncertainty and volatility, the gold and silver prices today mostly float higher despite brief falls followed by significant regrowth. This is why the gold price remains above $1900 per oz, and the silver price almost saw $30 per oz. 

What happens next to precious metals is not certain. The debate between Biden and Trump was rife with animosity and capitalized on concerns for the future. Particularly, Trump refused to condemn white supremacy with the “Proud Boys” movement. He also maintained he would not allow for a peaceful transition of power. Biden put up a good fight, but he also remained vague on certain matters such as his stance on the Green New Deal. 

 

What we do know is Biden plans to increase taxes significantly, particularly on the rich. This will then negatively impact corporate profit margins, which in turn affects earnings, and the stock market follows suit after. If the rich are taxed more, overall spending may decline and occlude economic growth. However, higher taxes yields higher spending on other fronts, which can stimulate the economy. 

This has also been the case during the pandemic. The Trump administration spent money and it has kept the economy mostly in the green, but perhaps not on an individual level. Analysts consider that if Biden is elected, this support would continue. The division remains, however, because both candidates have unique approaches. What citizens are most concerned with are policies from both sides, and if the election will be unimpeded, uncontested, and legitimate.

Should I Buy or Sell Gold in 2020?

So far, in 2020, gold prices have climbed to record highs amid the pandemic. The US economy has been in a recession since February with high unemployment levels. As a result, gold and silver prices today grew significantly year-to-date and more. New and seasoned investors started to buy gold coins and bullion this year to build a hedge against inflation. Additionally, the Federal Reserve pledged to keep interest rates “near 0” until 2023 at least. This also buoys the gold price in addition to the relationship between gold and the election. 

Additionally, general consensus among Peter Schiff, Citi Bank, Barron’s, CPM Group, and Kitco all maintain that the gold price will continue to balloon. In March, CPM Group proposed to Kitco that the next couple of years will probably be difficult for everyone across the board. Therefore, they are mostly in favor of positive interaction between gold and the election on top of the pandemic’s economic strain.

Also, Dan Popescu believes that gold and Bitcoin stand to only grow from the election. He is an analyst and consultant. In an interview on the IG Trading Markets podcast, he maintained that should Trump cut taxes for the rich and the stock market, it will be a bullish environment. However, if Biden wins, the dollar might weaken, thus sending gold and silver prices today higher. But, he opined that whether Trump wins or loses, gold will continue to rise. 

 

Your NYC Precious Metals Retailer

Bullion Exchanges prides itself on being a trusted precious metals retailer in the Diamond District of NYC. We work hard to offer high-quality products at competitive prices for all our valued customers. If you want to buy gold coins and bullion, visit our webstore and delve into our exciting inventory. We carry precious metals coins and bars available in gold, silver, platinum, and palladium. Also, please feel free to contact our team of customer service representatives if you have any questions regarding our products and services. If you are looking to sell gold, we will be more than happy to assist you.

Leave a Comment

Your email address will not be published. Required fields are marked *