Another psychological barrier has been broken when it comes to the price of gold. The current all-time high (ATH) is now over $2,500 per ounce, and the upcoming US elections will have a significant influence on the prices in the coming months. How will the royal metal react if Donald Trump wins, and what if Kamala Harris triumphs?
On Friday, August 16, the price of gold reached $2,508 per ounce, a record-high result, breaking another barrier despite optimistic macroeconomic data from the US regarding retail sales and labor market improving market sentiments and slightly pulling away the specter of recession looming over the United States.
This week, the eyes of the financial markets will be on Jackson Hole, where the annual symposium of central bankers will take place. Analysts and investors are awaiting the Friday speech of Jerome Powell, the head of the U.S. Federal Reserve. We might hear a clear message regarding the policy of lowering interest rates, which could start as early as the September Fed meeting.
In the coming months, the upcoming US presidential elections – in addition to economic indicators or the Fed’s decisions on interest rates – can significantly affect gold prices. The Republican candidate, Donald Trump, will compete against Kamala Harris, who will accept the party’s nomination at the just-starting National Democratic Party Convention.
How will Donald Trump’s victory affect the price of gold?
If Donald Trump wins the election, we can expect a continuation of the “Make America Great Again” policy. We would thus face protectionism, isolationism, a tightening of relations with China, and also a lot of chaos, unpredictability, and controversial statements that will shake market sentiments.
The Republican will most likely lower taxes and increase tariffs on goods from China, which of course will be met with retaliation. This, in turn, will hit the poorest and middle class, who will bear the cost of the higher tariffs. Tax cuts will mainly benefit corporations and the wealthiest individuals.
Trump will also seek to limit migration, which could result in a decrease in labor supply and increase wage pressure. He is also a supporter of a weak dollar and has attempted to influence the Fed. It is a realistic scenario that inflation might spiral out of control, and the economy will plunge into a recession, resulting in stagflation.
In addition to this, geopolitical issues should be noted. Both Trump and Vice Presidential candidate J.D. Vance are not interested in the war in Ukraine lasting, or the United States being involved in it in any way. As for Israel, Trump also advocates for a quick end to the conflict.
In summary, gold does not have many reasons to lose value in the event of a Republican candidate’s victory. Rather, it will appreciate, a taste of which we saw just after the July attack on Donald Trump. His poll numbers significantly increased, and the metal reached a new ATH at the level of $2,482 per ounce last month.
What if Kamala Harris wins?
Kamala Harris, who officially received her nomination at the beginning of August through online voting, before the Democratic Party Convention started in Chicago, will likely continue the policy of Joe Biden, under whose wing – as Vice President of the USA – she has spent the last few years.
The Inflation Reduction Act of 2022, aimed at reducing the federal government budget deficit, investing in domestic energy production, and the development of clean energy, will most likely become a priority. In the long run, this act aims to reduce inflationary pressure and the risk of recession, as well as create new jobs.
One of the IRA’s objectives is also to become independent of China in terms of battery supply. The countries most affected by Biden’s act are China, Japan, and South Korea. These three countries are home to the top 10 companies in the industry, which in 2021 accounted for over 90 percent of the global supply of lithium-ion batteries.
Harris’s policy towards China will not be accommodating and will be against Trump’s policy. The Inflation Reduction Act hurts China, where – under Biden’s presidency – the process of dedollarization has accelerated. China and other BRICS+ countries have intensified their shedding of dollar assets and increasing gold reserves over the past years.
The most significant influence on the gold price, regardless of the election results, could be the strong Asian demand, driven by China’s increasingly difficult economic situation, the conflict of interest with the USA, and the plan to solve this problem. China aims to diminish the role of the dollar as a reserve currency in the global economy and – possibly – introduce its own currency backed by gold.
Historically, who did gold vote for?
According to an analysis prepared by the World Gold Council, demand for gold bars and coins usually increases in the USA during the Democrats’ reign. However, if we look at how gold performed during the terms of America’s presidents, the record holder for growth in the price of the metal was… Donald Trump.
On the day of his inauguration, the price of an ounce of gold was $1,199.10. At the end of his term, it was already $1,854.60. The difference is therefore $655.50. The previous record belonged to another Republican, George W. Bush ($568.90) – who dealt with the attacks of September 11, 2001, two wars, and the beginning of the subprime crisis.
Joe Biden’s term is not over yet, but many indications suggest he has a high chance of beating Trump’s score. If we tentatively adopted the latest ATH at $2,508 per ounce as the end-of-term price, the course difference would amount to $653.40, almost as much as during the first term of the current Republican candidate.
Michał Tekliński, an expert on the gold market of Goldsaver.pl, Goldenmark Group.
Source: https://managerplus.pl/mamy-nowy-rekord-ceny-zlota-jak-na-notowania-kruszcu-wplyna-wybory-w-usa-61649
