How Does The US Election Affect The Gold Market?
The date’s been decided. On Tuesday, November 3rd, 2020, the United States of America will choose its 46th President. While the battle between the two leading contestants, current president Donald Trump and former Vice President Joe Biden, is neck-to-neck in many states, Americans are glued to their TV screens and social media to keep an eye on the latest election updates. But what do the upcoming presidential elections mean for precious metals investors in the country?
Gold has traditionally retained its value during war, hunger, terror, and other economically challenging times. But can it stay afloat amid the pandemic and fast-approaching elections?
Let’s look at the factors that can affect gold prices during elections to learn more:
A weakening dollar
The relationship between the dollar and gold is inversely proportional. This means that since gold is dollar-denominated, a rise in the fiat currency’s value leads to a decline in the yellow metal’s price, and vice versa.
Hence, during the current times when the dollar seems to be falling ahead of the US elections, gold prices have strengthened. Economists are holding the ultra-loose monetary policy adopted by the US Fed and the weakening US economy responsible for the downfall.
Since the Democrats and Republicans are poles apart when it comes to talking economic strategies, gold prices may be significantly affected if:
Biden wins and we see full Democratic control
If Joe Biden, the 77-year-old politician manages to win full sweep and Democrats take control of the house and the senate, we’llprobably see a rise in gold prices.
This is due to Biden’s green economic strategies that have assigned trillions of dollars to climate policies and infrastructural improvement plans. While these incentives may prove to be great for the country’s future, they may drastically increase the national debt, leading to a weakening of the US dollar and a rise in gold rates.
Trump wins and Republicans take over
During the 2016 elections, Trump won the presidential seat with majority votes. However, gold investors didn’t benefit too much from his win as the price of gold fell significantly and the stock rallied.
If Trump manages to win the 2020 elections as well, we may see a fall in gold prices again. However, during this year the stock market has seen an unprecedented rally owing to the mass government stimulus. Hence, if the stimulus continues well into 2021, we may not see a drop in gold prices even after Trump secures the presidential seat.
No matter the economic situation, the future of gold is bright and shiny. If you have the money for a long-term investment, consider buying some precious gold and silver coins and bullions from Orion Metal Exchange. Our wide collection of rare coins is sure to catch your interest. Call us if you have more questions!