Gold Prices and USA Election 2016
The price of gold awaits with trepidation the outcome of the 2016 USA Election, as do the majority of all other financial instruments.
The impact of the White House showdown on the value of the dollar represents only a part of the consequences ready to be unleashed from November. All the financial markets will in fact be ready to react to the victory of Hillary Clinton or Donald Trump, from shares to bonds and of course, commodities.
In particular, it is precisely the republican candidate, even though less favoured after the last face off, that is advocated by gold supporters and with good reason, as they see his victory as a major benefit for the most important of all commodities.
We understand why the potential election of Donald Trump in the November presidential elections could favour a rise in gold prices.
The price of gold ready to react at the USA Elections 2016: With Trump A Real Boom
The November presidential elections are approaching and the expectations, in addition to being supported by the current establishment of the White House, are all in favour of a Hillary Clinton victory.
The polls, in fact, give her the advantage over republican candidate Donald Trump and the last televised debate has only emphasised this trend.
The election of the Democratic candidate would represent in many ways a continuity factor considering the current administration. So what would happen in the case of a surprise?
The victory of Donald Trump is not a possibility to be ruled out. The electoral polls tend to ignore those who prefer not to express their opinion or those who have never voted before, not to mention those who, due to being undecided, prefer to publicly express their preference for the candidate who is in favour by the majority, at the risk of then formulating a different opinion the following month.
In short, the possibility of a Trump victory should not be completely ruled out, but the consequences would already be far more predictable.
If the Republican party were to win it is easy to imagine an unsettled reaction from the stock market, with many investors preferring to free themselves of their shares in order to take up a more secure investment.
This is precisely where gold enters the scene.
The least likely event, with the most uncertain consequences and greatest fears is a Trump victory, providing motivation to shift the preferences of many towards safe haven assets. Even if only 1% of the capital invested in USA stocks were to transfer to the gold market, this would cause a 10% rise in just one week, up to a possibile 25% from now until the end of the year, above the price of $1.750
These are obviously speculations but there is no lack of historical basis to support them. Elections of controversial USA presidents, such as Jimmy Carter in 1976, Bush in 2000 and Obama in 2008, have always caused a substantial rise in the price of gold.
This is an event that may be repeated if the contested Donald Trump comes through next November.
Gold Prices and USA Election 2016: destined to rise in any case
The forecasts of many analysts see gold ready to experience a rise thanks to the next USA elections, regardless of who becomes the winner.
Georgette Boele of the ABN Amro predicts a moderate increase in the price of gold in the case of a Clinton victory, estimated at $1.650, but a more substantial rise in the case of a Trump victory, towards $1.850
The major benefit resulting from the election of the republican candidate is determined not only from the factors analysed previously, but also from the effects of the policies advocated by his coalition.
Economic isolationism, one of Trump’s objectives, in fact risks a weakening of the fundamentals of the American economy. It is a premise offering fertile ground for the growth of the value of gold.
At that point not even a more restrictive monetary policy, that sees the rise in interest rates by the Fed, would be able to aid a recovery in the price of precious metals, destined to end 2016 on the crest of the wave.
Citigroup also estimates a rosy future for gold, ready to start their engines even before the November elections.
The market, as we well know, usually predicts the reactions following the victory of either candidate in advance, a factor that would gain strength if next month’s polls should show a recovery for Trump.
The arrival of a new presidential cycle, regardless of who it starts with, seems in any case destined to strengthen gold’s trend, a perspective shared by many analysts.
Investors, in fact, could translate the scepticism of the new occupancy preferring a more secure, medium term investment that is less correlated with the national economy, pending the inaugural year.