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USA Presidential elections and potential effects on precious metals

Published by Karl Martin Karus in category Precious metals on 20.10.2020
Gold price (XAU-SEK)
15 277,10 SEK/oz
  
+ 92,50 SEK
Silver price (XAG-SEK)
228,41 SEK/oz
  
+ 1,68 SEK

The next U.S. presidential election will take place on Tuesday, November 3, 2020. The two candidates are Donald Trump, who has been the president for 4 years, or Joe Biden, who served as vice president during the Obama administration, will win. In this article, we summarize what could happen to precious metals if either man wins.

WHAT IS THE CURRENT STATE OF GOLD AND SILVER?

After gold hit an all-time high of USD 2073 / oz against the dollar, it had a price correction and is currently about USD 1900 / oz. Since mid-August, gold has moved sideways to form a triangle. Moving Averages still confirm the bull trend. The critical breakthrough point is in the range of 1970-1980 USD / oz.

Silver has jumped almost 3x since mid-March when the price of silver was 11.7 USD / oz. Over the next five months, until mid-August, the price of silver rallied to 30 USD / oz. Today, silver, like gold, trades in lateral movements. Moving Averages confirm the continuing bull market.

As the US presidential election approaches, we will see that the volatility of the precious metals market has remained lower. It seems that investors are holding cash until the „sky clears“ a bit.

WHAT CAN WE EXPECT IF TRUMP WINS?

Trump’s victory is good for Wall Street –  the stock markets. But in this uncertain economic climate, Trump’s victory should not have a bad effect on precious metals either, as the metals prices tend to rise when there are economic fears – growing Covid-19 cases, frantic money printing, etc.

Trump’s victory would be a continuation of the normality that has developed today, which, above all, would still favor the stock markets and promote the American economy.

WHAT CAN WE EXPECT IF BIDEN WINS?

If Biden wins, the United States would see major economic changes, especially mega-corporations and the super-rich.

Under his economic revival plan, the federal government would spend $700 billion on research and development for new technologies and energy initiatives and on American goods and services. What is key here is that Biden plans to pay for these and other programs by raising taxes “on corporations and the wealthy”. In particular, he wants to hike the corporate tax rate from the current 21 to 28 percent. Wall Street is unlikely to like it, and after a slow economic recovery, such activity could collapse the stock market. (1)

However, the research, development, and implementation of Biden’s green energy technology is likely to have a very good effect on the price of silver. Silver components are widely used in green-energy/in reusable energy development. Analysts think it could spike silver price to 50 USD/oz.

WHO LEADS?

What are the current prospects for the US presidential election and who is leading? If we look at the current polls in the sample, it is clear that Biden is strongly predominant. Then again, history has shown that at this time, polls numbers are not crucial. (2)

Read more: https://ig.ft.com/us-election-2020/

IN CONCLUSION

Economically, however, the situation is dubious and ignorance is high. Regardless of who becomes the new American president, macroeconomic indicators still show favorable conditions for precious metals. (3)
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Disclaimer: This article is for informational purposes only and is not intended as an investment analysis or recommendation to sell or buy commodities. Tavex is not responsible for any decisions made based on this information. Investing is associated with opportunities and risks, and the market value of commodities can both increase and decrease. Past or future yields on the commodities and financial ratios shown above do not represent a promise or an indication of future earnings.

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