Who Do You Choose, Gold? Trump or Biden?

There are only a few days left until the elections. Who will become the next American president? Donald Trump or Joe Biden? Recent national polls indicate that the latter continues to maintain his lead over the incumbent running for reelection. Biden has an average polling lead of 10.0 percentage points over Trump, as the chart below shows. It is a massive advantage that puts Biden in a better position than any other challenger since 1936, when the first scientific polls were taken in a presidential race.

The big difference stems from several factors, one of which is the fact that white seniors, a significant group of voters who helped Trump win in 2016, are now dissatisfied with the presidents erratic handling of thepandemic. People simply believe that Biden will deal better with theepidemic. He is also showing strength in the Midwest, which was Trumps key to victory in 2016.

However, like the majority of people, I myself also mistrust the polls, especially the nation-wide ones. After all, the majority in the electoral college, and not the popular vote, ensures the presidency. But still, therecent state-by-state polling dataindicates that peoples votes would translate into 279 votes for Biden in the electoral college, giving him the presidency (270 votes is needed to win). Most importantly, Biden leads even in the scenario of state polls far off as they were in 2016.

Moreover, polls are not the only thing that suggests Bidens win. The predicting markets, where people put their money when their mouth are, such asPredictIt,also forecast Bidens victory. According to the bets, he has about 66-67 percent chance of becoming the next POTUS.

Fair enough, Biden has more chances to become the next president, we got it. But what would his presidency mean for the economy and the gold market? Well, lets start from the scenario of Trumps victory. If he wins, we could expect the continuation of the same (however, given Trumps erratic behavior, I wouldnt be surprised to see some big shifts during the second presidency):trade warwithChina, additional tax cuts, more government spending, and further reduction in regulations. Trumps victory would be somewhat positive for the economic growth, as it was in the last four years, but with some caveats. First, trade war is hurting the economy. Second, thefiscal deficitswill go up further, as Trump does not care about them. Third, the President has no coherent strategy to cope with the pandemic (other than waiting for the vaccine), which could undermine the economic recovery.

And what would Trumps triumph imply for the gold prices?Well, his victory in 2016 was bad for the gold prices in the first months (after initial spike when the results were announced), as the chart below shows.

However, looking at things holistically, Trumps presidency was pretty excellent for the gold prices just take a look at the chart below! Thus, Trumps victory would not be bad for the gold prices, especially in the current macroeconomic environment of negativereal interest ratesand ballooningpublic debt. As a matter of fact, Trump is actually a big supporter of lowinterest ratesand high deficits!

And what about impact of Bidens victory on the economy and the gold market?Well, as president, Biden can bring more economic stimulus, an end of trade wars, higher taxes (however, likely not until the economy fully recovers) and eventually, more regulations. Given that Biden is likely to run even higher deficits than Trump, his triumph could be also quite good for the gold prices.

The scenario in which Bidens enters the White House, while the Democrats take control of the whole Congress could be particularly positive for the precious metals, as Republicans wouldnt be able to block the worst economic proposals. Therefore, the markets could see Bidens victory as more likely to generate higherinflation, which could boost some demand for gold as aninflation hedge.

But, wait a moment, didnt you just write that every scenario is good for gold?Yup. You see, regardless of who wins the election,I expect more fiscal stimulus, which could support the demand forgold as a safe-haven asset. And, no matter who wins, theFedis likely to maintain its dovishmonetary policyandzero interest rates.

In other words, the POTUS might be the most powerful man in the world, but even he does not have the power to control the economy. And the economy is still not out of the woods. It is true that the economy is recovering, but it still remains below the pre-epidemic level. Hence, both the monetary andfiscal policies no matter whether Trump or Biden will live in the White House will remain accommodative,which should support the yellow metal.

Thank you for reading todays free analysis. If you enjoyed it, and would you like to know more about the links between the economic outlook, the current (past?) crisis and the gold market, we invite you to read the OctoberGold Market Overviewreport. Please note that in addition to the above-mentioned free fundamentalgold reports, and we provide premium dailyGold & Silver Trading Alertswith clear buy and sell signals. We provide these premium analyses also on a weekly basis in the form ofGold InvestmentUpdates. In order to enjoy our gold analyses in their full scope, we invite you tosubscribe today. If youre not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. Its free and if you dont like it, you can easily unsubscribe.Sign up today!

Arkadiusz Sieron, PhD
Sunshine Profits: Analysis. Care. Profits.

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Disclaimer:Please note that the aim of the above analysis is to discuss the likely long-term impact of the featured phenomenon on the price of gold and this analysis does not indicate (nor does it aim to do so) whether gold is likely to move higher or lower in the short- or medium term. In order to determine the latter, many additional factors need to be considered (i.e. sentiment, chart patterns, cycles, indicators, ratios, self-similar patterns and more) and we are taking them into account (and discussing the short- and medium-term outlook) in ourGold & Silver Trading Alerts.