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Election Outlook: Analyst Says No Matter Who Prevails, Gold Wins

Isaac Nuriani    |
May 10, 2024
  • Experts say upcoming 2024 presidential election presents some risk.
  • Investment bank recommends gold to help mitigate election uncertainty.
  • Strategist says both Biden and Trump could be good for gold.
  • Key fiscal and geopolitical gold drivers expected to thrive in next administration.
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As you likely know by now, precious metals have demonstrated a great deal of enthusiasm lately. 

From the end of November through this week, gold climbed nearly 15% to more than $2,300 per ounce.[1] And while silver has received less attention during gold’s rise, it turns out the white metal rose even more on a percentage basis over the same period: 25%, to a price-per-ounce of around $28.50.[2] 

A couple of weeks ago, both metals had reached even higher, with gold surpassing $2,400 for a time and silver knocking on the door of $30 per ounce.[3] But it was then the metals seemed to decide it was time for a breather, and each retreated from those respective price points.  

The catalyst of that pullback, said analysts, was two-fold: some profit-taking cued largely by growing uncertainty over the likelihood of imminent metals-favorable interest rate cuts, as well as a diminishment in Middle East tensions that served to lower the assets’ geopolitical risk premium.[4] 

So, after a period during which an asset has behaved in a particularly inspired fashion, the question that’s invariably asked is, “What’s next?” 

In the case of gold, experts seem to think the answer is that it will regroup and resume its upward trajectory.  

The fundamental reason, they say, is that so many of the drivers to which gold’s recent performance has been attributed remain intact. And that’s because those drivers are rooted in economic and geopolitical dynamics that are expected to remain relevant for the foreseeable future. 

“Historically, the kind of macroeconomic and geopolitical background that we’re experiencing right now has always been very favorable for gold,” George Milling-Stanley, chief gold strategist at State Street Global Advisors, recently said, adding, “It would not surprise me to see gold go a good deal higher from where we are.”[5] 

When Milling-Stanley speaks of “the kind of macroeconomic and geopolitical background” he says is in play right now, he’s referring to one that is replete with uncertainty. And as it turns out, one specific potential driver of both macroeconomic and geopolitical uncertainty to which precious metals analysts are starting to turn their attention is the 2024 U.S. presidential election. 

The election is seen as a possible source of gold-favorable tension in two ways.  

One is the election itself, meaning, the period of the campaign and the actual voting event. Even a casual observer of the current U.S. political climate and presidential election dynamics recognizes the potential for election season – including the election itself – to be fraught with tension…even upheaval. Some analysts suggest that if the election were to evolve in this way, it could constitute yet another concerning geopolitical “event,” one with the capacity to strengthen gold. 

Observers say the other way the election is poised to possibly exert a positive impact on gold is through the longer-term political implications that could manifest in the aftermath of the voting event itself. In a recent analysis, Bart Melek, global head of commodity markets strategy at TD Securities, weighed key policy outcomes expected to be realized following the election, and projected that gold-positive conditions are likely to emerge regardless of whether Joe Biden or Donald Trump wins the White House 

Few would disagree that uncertainty is among gold’s most reliable drivers. And according to experts, healthy doses of uncertainty – all kinds of uncertainty – have been largely responsible for the resilience demonstrated recently by gold. That uncertainty is expected to persist, going forward, in a variety of forms, including economic, fiscal and geopolitical. And it seems one possible driver, the U.S. presidential election, has the potential to help catalyze all three. 

UBS: We Recommend Gold as a Hedge Against “Uncertainties About U.S. Election” This Fall 

Unsurprisingly, the U.S. presidential election potentially can have an impact on gold just as it can have an impact on any other asset. After all, elections have consequences, as is popularly said, and often those consequences come in the form of economic, fiscal and geopolitical “macro” policies that exert great effects on financial markets and instruments. 

We’ll talk more in a bit about how the two different possible outcomes of the upcoming presidential election could impact gold, specifically. Perhaps what is not as clear to some, however, is how the election itself – meaning the election ritual – could impact gold. 

I mean, it’s just people voting, right? 

Usually, yes. But there could be at least a little more to it this time, as observers are quick to point out. 

It’s no secret the upcoming election – including the associated campaign season – is poised to be as divisive as it’s expected to be competitive. Recent polls suggest President Biden and President Trump are in an exceptionally close race, currently. According to RealClearPolling, national surveys right now have Trump ahead of Biden by an average of just 1.5%. One recent poll by Morning Consult has the current president and the former president tied at 43%.[6] 

Historically, a lot of U.S. presidential elections have been close. But it’s difficult to think of another one that’s been as contentious – and prone to disruption, potentially.  

“It’s not simply due to the fact that foreign and domestic threat actors will seek to exploit this election to achieve their ideological and geopolitical objectives,” former Department of Homeland Security intelligence chief John Cohen said recently. “We can also expect the political discourse associated with this election will become even more polarized, more angry and more divisive.”[7] 

In a recent assessment of the election’s potential to impact markets and the economy, the Chief Investment Office at UBS recommended gold as a portfolio hedge in part because of the “uncertainties about U.S. elections this November.”[8] 

“We anticipate a highly contentious campaign, with the two candidates espousing competing world views on issues ranging from taxation to industry regulation to foreign policy,” UBS said, adding, “Geopolitics will cast a shadow over this year’s presidential election.”[9]  

U.K.-based online trading platform IG Group also pointed to the possibility we could see increased political/geopolitical tension arising from the election as well as see gold benefit from that condition. 

“The current U.S. election poses a notable political risk to investors,” IG said, adding that much of that risk could stem from “disputes over the validity of the election.”[10] 

As a part of its assessment, IG cited data noting not only that gold has a 0.72 correlation with global political risk but is correlated with U.S. political risk to the tune of 0.94 (1.00 represents a perfect correlation between two variables).[11] 

But as I said earlier, the potential consequences for gold arising from the election are rooted in much more than the election event itself. Indeed, the larger and more lasting potential implications for gold are more likely to stem from the policy consequences generated by the voting results. And from the vantage point of TD Securities’ Bart Melek, the outlook for gold appears favorable regardless of whether Joe Biden or Doanld Trump wins the White House. 

TD Securities: Both Biden and Trump Victories Could Worsen China-U.S. Relations, Fiscal Stability  

Melek, TD Securities’ top commodities strategist, says his optimism over gold’s prospects without regard to who prevails in November is primarily attributable to two factors: the perpetually tense relationship between China and the U.S., and the nation’s deteriorating fiscal profile. 

As for the salty China-U.S. relationship and the heightened geopolitical tension naturally arising from it, Melek expects that to persist whether it’s Biden or Trump who’s in charge at the Oval Office. 

For his part, Biden unquestionably has been assuming an overtly adversarial posture toward Beijing. In his most recent State of the Union address, for example, the president referred explicitly to China’s “unfair economic practices” and touted his administration’s commitment to “standing up for peace and stability in the Taiwan Straits,” a signal to Chinese leadership that aggression toward Taiwan won’t go unchallenged.[12] 

In a separate address, Biden also characterized the Chinese as “cheaters” on the matter of trade, saying their prices are “unfairly low” because companies there are government-subsidized and therefore “don’t need to worry about making a profit.”[13] During the same speech, the president called for the tripling of tariffs on some Chinese steel and aluminum.[14] 

In the view of Melek, a Biden win would ensure the continuation of what the analyst calls a “tough China policy,” potentially resulting in positive momentum for gold.[15] 

As for the anticipated condition of China-U.S. relations if Trump wins, Melek says they could prove even more fractured than what they’re poised to be during a second Biden tenure – and that could be a boon for gold. 

“A likely even more adversarial stance toward China and Iran taken by a Republican administration would also contribute to gold’s good fortune,” Melek says.[16] 

Chinese analysts also see the potential of a “more adversarial stance” assumed by Trump were he to win. 

“With Trump, there is no floor to U.S.-China relations,” said Washington-based analyst Sun Yun, “and Trump poses great risks and uncertainties, including the possibility of a military conflict.”[17] 

That said, even if President Biden is viewed as slightly less problematic, overall, it seems many observers consider the difference between the two to be negligible, in terms of the quality of the relationship between Beijing and Washington.  

“For China, no matter who won the U.S. presidential, they would be two ‘bowls of poison,’” said Zhao Minghao, a professor of international relations at Fudan University in Shanghai.[18] 

And in the view of Melek, those “bowls of poison” for China could well prove to be “manna for gold.”[19] 

High Annual Budget Deficits Projected to Remain the Status Quo Whether Democrats or Republicans Control the White House 

As for the nation’s fiscal picture, Melek also sees that growing darker no matter who’s in charge…and that gold stands to benefit either way. 

In fact, notes Melek, “Persistent massive deficit spending under the Biden administration and a Fed that was very slow to hike rates in response to the recent inflation spike have already helped to drive investors into gold as purchasing power protection or a hedge against long-term U.S. dollar depreciation.”[20] 

Michael Hartnett, chief investment strategist at Bank of America, would agree. In March, Hartnett explicitly connected the dots from the surging national debt to gold’s current strength, pointing to the roughly $1 trillion-per-100-days pace at which the national debt has been rising and saying: 

“Little wonder ‘debt debasement’ trades closing in on all-time highs, i.e. gold $2077/oz.”[21] 

Since that time, gold has climbed roughly another $250 per ounce.[22] 

As it stands with the current administration, the unattractive fiscal outlook already seen as a key driver of gold is poised to get even uglier. According to a recent assessment by the Congressional Budget Office, the annual deficit is projected to average roughly $2 trillion per year for the next 10 years, and would help to push the gross national debt 60% higher – to more than $54 trillion – over the same period.[23]  

As bad as that looks, Melek raises the possibility that the nation’s fiscal circumstances could grow even more concerning under Republican leadership, due to the party’s historical affinity for tax cuts. 

“The U.S. deficit would likely grow even larger if Trump were to become President again.” Melek says. “In sharp contrast to Mr. Biden, the GOP may try to reduce taxes. Meanwhile, there is no substantive plan to reduce spending.”[24] 

“The resulting higher deficit projections from the already very high numbers,” Melek says, “should help gold as it suggests higher inflation, lower real rates and continued central bank buying.”[25] 

The prospect of gold benefiting from the 2024 presidential contest in multiple ways underscores not only the metals-favorable dynamics of the upcoming election but also the inherent capacity of gold to thrive in the face of uncertainty; uncertainty that, as renowned metals strategist George Milling-Stanley suggests, is poised to remain in play from a multitude of specific drivers and help energize gold, going forward. 

Those investors who also are of the opinion that uncertainty – election-related and otherwise – could remain a feature of the global landscape may be intrigued by the possibility that precious metals could help mitigate its potential negative impacts. Some might even seek to acquire gold and/or silver through a tax-advantaged gold IRA 

Whether they do or not, it seems reasonable to at least consider that economic and geopolitical uncertainty – in so many different manifestations – is destined to remain the constant companion of the broader investment community. And that should be enough to give pause to the prudent investor, regardless of how – or even if – they choose to explicitly engage that uncertainty. 

 

 

[1] CNBC.com, “Gold COMEX (Jun′24)” (accessed 5/9/24).  
[2] CNBC.com, “Silver COMEX (Jul′24)” (accessed 5/9/24). 
[3] CNBC.com, “Gold COMEX (Jun′24)”; CNBC.com, “Silver COMEX (Jul′24).” 
[4] Sagar Dua, FXStreet.com, “Gold price plunges as Middle East tensions ease” (April 22, 2024, accessed 5/9/24). 
[5] Neils Christensen, Kitco.com, “Gold needs to test support but prices can still end the year much higher – State Street’s Milling-Stanley” (May 6, 2024, accessed 5/9/24). 
[6] John Dorman, Business Insider, “We are 6 months from the 2024 presidential election. Here’s where things stand.” (May 5, 2024, accessed 5/9/24). 
[7] Sasha Pezenik and Josh Margolin, ABCNews.com, “The top threats facing the 2024 election” (February 2, 2024, accessed 5/9/24). 
[8] UBS.com, “Gold as a hedge” (March 28, 2024, accessed 5/9/24). 
[9] Ibid. 
[10] Tom Bailey, IG.com, “The safe haven appeal of gold amidst rising geopolitical risks in 2024” (February 20, 2024, accessed 5/9/24). 
[11] Ibid. 
[12] William Gallo, VOANews.com, “Biden Targets China During State of Union Speech” (March 8, 2024, accessed 5/9/24). 
[13] BBC.com, “Biden calls for tripling tariffs on Chinese metals” (April 17, 2024, accessed 5/9/24). 
[14] Ibid. 
[15] Bart Melek, TD Securities, “U.S. Election Dynamics Looking Positive for Gold” (May 3, 2024, accessed 5/9/24). 
[16] Ibid. 
[17] Didi Tang and Ken Moritsugu, AP News, “China sees two ‘bowls of poison’ in Biden and Trump and ponders who is the lesser of two evils” (January 30, 2024, accessed 5/9/24). 
[18] Ibid. 
[19] Melek, “U.S. Election Dynamics.” 
[20] Ibid. 
[21] Michelle Fox, CNBC.com, “The U.S. national debt is rising by $1 trillion about every 100 days” (March 4, 2024, accessed 5/9/24). 
[22] CNBC.com, “Gold COMEX (Jun′24).” 
[23] CBO.gov, “The Budget and Economic Outlook: 2024 to 2034” (February 2024, accessed 5/9/24). 
[24] Melek, “U.S. Election Dynamics.” 
[25] Ibid.  
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