The outlook for gold remains optimal. Despite a recent pullback in the metal’s price, key fundamentals strongly support the idea that gold’s longer-term upward trend will continue. Examples of these drivers include hyper-accommodative monetary policy, spendthrift fiscal policy and a volatile sociopolitical environment. Even those experts who expected gold to engage in its current consolidation pattern believe it will soar much higher before the current bull market ends.
That said, many are wondering what influence could be exerted over gold’s price by the results of the upcoming presidential election. What will four more years of President Trump mean for gold? How might gold react to a Biden administration?
As Election Day approaches and analysis of each candidate’s policies intensifies, it appears there’ll be little difference in how gold performs over the next four years. The reason is relatively straightforward: Despite the perceived disagreements between party ideologies, there’s no good reason to believe the fundamental drivers of gold are going to suddenly disappear. The agendas of both candidates favor even more generous government spending and extremely dovish Federal Reserve monetary policies. Not only that, it’s likely the gold-favorable civil unrest we’ve witnessed for months now will continue regardless of who emerges victorious on November 3. Personal candidate preferences aside, it seems gold can’t lose, regardless of the election’s outcome.
Analysis by the Center for a Responsible Federal Budget (CRFB) reveals fiscal irresponsibility will remain the status quo no matter who wins the election. As bad as this news is for the foundational stability of the nation’s economy, it is, admittedly, likely to be good news for gold.
Rick Newman recently broke down the CRFB report for Yahoo Finance. In a nutshell, there’s no reason to believe Trump or Biden will do anything to rein in the debt. More than that, it appears we can probably look forward to the debt reaching truly frightening levels under the stewardship of either man. If Trump wins, according to the CRFB, expect the federal debt to grow another $5 trillion or so by 2030. The debt recently passed above the $27 trillion mark and now represents 98% of gross domestic product (GDP). A federal debt of $32 trillion would represent 125% of GDP, the CRFB estimates.
Biden’s planned agenda for the country could potentially add even more to the national debt, Newman said – another $5.6 trillion. If that comes to pass, the debt-to-GDP figure would soar to 128%.
The heights to which the debt could skyrocket are positively jaw-dropping. Even more stunning to me is the degree to which much of the nation seems content to disregard that towering sum. I haven’t even seen much sign of disagreement about the debt based on party affiliation. Republicans seem just as unmoved as Democrats about the prospect of a $30-plus-trillion debt level.
You may remember a time when the topic of reducing the debt was a popular and resonant campaign theme. Now, in what seems to have become an alternate reality, reducing the national debt is seen by Washington as the fiscally irresponsible path.
Former Federal Reserve Advisor Danielle DiMartino Booth confirms that the current fiscal outlook – aided and abetted by the Fed’s policy agenda – is great news for gold. What’s more, she says, it’s that very fiscal outlook which holds hostage any president who might try to bring the Fed back to earth.
“I don’t know any leader right now being considered to run the country that would have the strength given the (present) fiscal backdrop,” DiMartino Booth told Investing News. “Given how deep the recession is, and how prolonged it looks like it’s going to be — who would even begin to try and rein in the Fed right now, because they need the money printers, so to speak.”
Also speaking to Investing News about the current fiscal and monetary landscape was analyst Lobo Tiggre of Independent Speculator. According to Tiggre, the emphasis on both fiscal stimulus and accommodative monetary policy here and abroad will lead to a commodity “supercycle” benefitting gold.
“We will see a commodity supercycle with the precious metals, the energy commodities and industrial metals all surging higher,” Tiggre said. “Either because the economy recovers and the raw materials of the economy are needed, or because it doesn’t, and the stimulus really opens the inflationary floodgates and includes infrastructure plans and other investing that would be good for commodities.”
Devlyn Steele, Augusta Precious Metals’ director of education, also suggests a gold and silver supercycle is in play right now. According to Steele, the current fiscal and monetary environment looks like it’s conspiring to drive money from key mainstream assets to physical precious metals. Steele says retirement savers “are trapped in negative real yields” for the foreseeable future, which according to their tendencies through history is good for gold and silver.
There’s another reason precious metals should remain strong regardless of who wins on November 3: ongoing civil unrest. The prevailing narrative says the protests and riots taking place across the country will vanish instantly at news of a Biden victory. I’m not so sure.
Recently, Black Lives Matter Los Angeles co-founder Melina Abdullah told ABC News that she’s not supporting Biden. Abdullah sees the Democratic Party nominee as being a part of the same “violent white supremacist” system she claims exists currently. Separately, Lawrence Nathaniel, co-founder of “I Can’t Breathe” in South Carolina said both “Joe Biden and [President Donald] Trump…are blinded by the struggles that the lower end of Americans are feeling today.” It could be inferred from such sentiments that widespread civil unrest will remain a part of the American landscape regardless of who wins the election.
Former Fed advisor Danielle DiMartino Booth says she thinks the turmoil will continue and that gold will be a direct beneficiary. “Gold and disruption go hand-in-hand,” she said in her remarks to Investing News. “So, to the extent that there was continued and increased social unrest after the election, that I think would benefit gold prices for sure.”
In my opinion, the fundamentals driving gold right now won’t be altered in any meaningful way by the election. Extremely dovish monetary policy and massive fiscal stimulus are expected to remain a part of the national economic landscape for years. Also, there’s good reason to believe widespread civil unrest will continue even if the presidential administration changes. Assuming these conditions persist – and there’s no good reason to think they won’t persist – and taking into consideration the tendencies of precious metals to respond favorably in the face of volatility, I believe the gold environment should remain exceptionally fertile.
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