Elections & Gold: What can we expect?

 
The price of gold has long been seen as a barometer of economic and political uncertainty. In times of crisis, investors turn to this precious metal as a safe haven. But what happens to the gold price during one of the world’s most influential political events: the U.S. presidential election?
 
In this article, we explore the historical and potential impact of U.S. elections on the price of gold and how investors respond in anticipation.
 
The uncertainty surrounding elections, especially when the outcome is unclear, prompts investors to buy gold as protection. Political uncertainty can lead to volatility in financial markets, driving investors towards safe havens such as gold. For example, this phenomenon was observed during the 2016 election, when Donald Trump's unexpected victory led to an 8.6% increase in the gold price.
 
The economic policies of Democrats and Republicans can affect markets and the price of gold in different ways. Republican presidents, for instance, tend to favour tax cuts and deregulation, often resulting in a stronger dollar and lower short-term gold prices. Democrats, on the other hand, focus more on government spending, which can fuel inflation expectations and increase demand for gold. During the 2020 election, when Joe Biden won, the gold price rose by 24.4% in response to the expected increase in government spending.
 

Historical Examples

Historical data shows that the gold price often reacts to the outcome of U.S. elections. During the 2008 election, in the midst of the financial crisis, the gold price rose significantly due to the increased demand for safe havens. In 2020, amid the COVID-19 pandemic, the gold price experienced a similar increase driven by uncertainty and economic unrest.
 

Market Expectations

Investors often use the elections to take positions in gold, depending on the anticipated winner and their policy proposals. For example, ahead of the 2024 election, it is expected that the gold price will respond to the election outcome and subsequent policy measures. A Republican victory could lead to a stronger dollar and lower gold prices, while a Democratic victory would likely result in higher gold prices due to anticipated inflation and government spending.
 
While the U.S. elections play a major role in fluctuations in the gold price, other factors, such as inflation, global geopolitical tensions, international trade conflicts, and monetary policy decisions, are also highly influential. Investors would do well to consider the broader economic picture and not focus solely on political events. Gold will always play a valuable role in times of uncertainty, but its price remains subject to a complex web of influences.
 
Whatever happens, at The Silver Mountain, we are always here to help you with confidence. We offer physical gold and silver at the best prices in the Netherlands and provide a unique buy-back guarantee. This means that you can always easily sell your precious metals back to us based on fixed formulas relative to the prevailing gold and silver prices. We buy back at any time, regardless of the volume you sell and regardless of the gold or silver price.
 
Disclaimer: The Silver Mountain does not provide investment advice, and this article should not be considered as such. Past results are no guarantee of future performance.