While Donald J. Trump or Kamala Harris's direct influence on the precious metals market may be limited, it's crucial to grasp how their past policy platforms have shaped the broader forces that drive the demand for gold.
Will a Second Trump Presidency Be Good for Gold Prices?
Goldman Sachs recently released a report suggesting investors should buy gold to hedge against inflation if Donald Trump and the Republicans sweep the 2024 election. Goldman Sachs believes that a Republican sweep in presidential and congressional elections would present the most significant risks to inflation and bond returns, stemming from higher import tariffs, slower immigration, tighter sanctions on Iranian oil, and lower taxes. Conversely, some argue that Trump would lower inflation, including his first-term track record and policy of "Drill, Baby Drill," which allowed the United States to prosper by reducing the cost of oil. Under Trump, in 2019, the United States created more energy than it had consumed for the first time since 1957.
Under Trump, when fuel costs were cheaper, transporting raw materials and finished products by ships, planes, trains, and trucks became deflationary compared to President Obama's and President Biden's policies of decreasing American energy production. Historically, President Trump has used tariff rhetoric to negotiate better deals with trade partners. If this is the case in his second term as president, the concern from Goldman Sachs that implemented Trump's tariffs on imported goods could dramatically increase inflation may be exaggerated. While Trump was known as a peacetime president on the world stage, with no new wars funded by America, his strong stance for "America First" policies did add more fuel to opposing nations.
The gold price rose substantially during Trump's presidency, increasing from $1,209 when he assumed office on January 20, 2017, to U.S. $1,839 on his final day, January 19, 2021.
Would a Kamala Harris Presidency Be Good for Gold?
While supply chain issues in 2021 contributed to inflation, President Joe Biden's opposition to American gas pipelines was a more potent force driving prices higher.
When inflation peaked at 9.1 percent in 2022, Joe Biden tapped into the strategic oil reserve to subsidize the out-of-control energy costs in the United States.
If potential future President Kamala Harris wanted to keep the same energy platform as Joe Biden or Barack Obama, she would not be able to deplete the U.S. Strategic Petroleum Reserves further to hide the cost of the policy because the reserves have not been this low since Jimmy Carter and stagflation in the late 1970s. After the pandemic in 2021, the big government spending continued. In 2024, our government spending is outpacing our GDP (gross domestic product) this year. These policies under a Kamala Harris presidency would likely be good for the price of gold.
When Joe Biden took over from Trump on January 20, 2021, gold was $1,871 an ounce. Today, it is $2,410 an ounce.
The Long Game for Investors
The BRICS organization (Brazil, Russia, India, China, and South Africa), founded in 2008, has distanced itself from the U.S. dollar as a global reserve currency during Democrat and Republican presidencies. This shift in global currency dynamics has significant implications for the gold market, as it signals a potential decrease in the dollar's dominance and an increase in the demand for alternative safe-haven assets like gold. This year, Iran, Egypt, Ethiopia, and the United Arab Emirates joined BRICS, further strengthening this trend.
Historically, gold returns under Democratic and Republican presidents have averaged 11.2 percent and 10.2 percent, respectively. The short-term effects of a presidential election and a 4-year term of a president in the United States are minor compared to the 5,000-year history of gold as a safe haven against the rise and fall of governments and fiat currencies.
The underlying factors for the recent rises in gold will still hold after Tuesday, November 5, 2024 (election day) in the United States.
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byUnited States Gold Bureau