Gold Will Rise No Matter Who Wins U.S. Election
With gold prices up 20% in 2016, it’s been a good year to be bullish on precious metals. Trading near $1,275 per ounce, gold is up nearly 22% since the start of 2016 and is enjoying one of its best annual performances since 1980!
Gold prices were depressed throughout October, but thanks to a tight race for the White House, the yellow metal is on the rise again. Making a run at $1,300 per ounce, gold prices are at their highest level in over a month.
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There are two primary reasons for the bullish sentiment. First, gold is jumping on the weaker U.S. dollar with the index (against a basket of global currencies) at a two-week low of 98.42.
Second, gold prices are rising due to the uncertainty about the outcome of next Tuesday’s U.S. election. Despite the tight race, investors in gold will be the biggest winners next week, at least that’s according to HSBC Holdings Plc. (Source: “Buy Gold No Matter Who Wins Election,” Bloomberg, November 1, 2016.)
A Donald Trump win would be better for gold prices than a win by Hillary Clinton, but no matter who wins, gold prices should surge at least eight percent following the election.
Why? Both Trump and Clinton have backed trade policies that could drive increased demand for gold. This includes renegotiating major free-trade policies. The U.S. currently has free-trade agreements with 20 countries, including Australia, Canada, Mexico, Korea, Israel, and Singapore.
Uncertainty About TPP Also Good for Gold
Moreover, both Clinton and Trump have been vocal opponents to the Trans-Pacific Partnership (TPP) free trade agreement, saying it will hurt American workers. That being said, Trump is a lot more vocal about his opposition, saying a “Trump win is the only way to stop TPP catastrophe.” (Source: “Trump win is the only way to stop TPP catastrophe,” Trump Pence, August 2, 2016.)
Back in 2012, on a trip to Australia, Clinton called the deal the “gold standard” of trade. She may deny she said it, but her comments are there for everyone to see on the U.S. Department of State website. (Source: “Remarks at Techport Australia,” U.S. Department of State, November 15, 2012.)
Clinton has since changed her stance and, like Trump, she now opposes the TPP.
In addition to the U.S., the 12-nation deal includes other major economies that share the Pacific Rim, including Australia, Canada, Mexico, New Zealand, Malaysia, Vietnam, and Japan.
How High Could Gold Go?
If Trump wins his way to the Oval Office, gold prices could hit $1,500 an ounce, up approximately 18% from the current price of $1,273 per ounce. If Clinton wins, gold prices could reach $1,400 by the end of December.
Gold is a hedge against economic and, in this case, political uncertainty. And there is enough short-term uncertainty in the lead-up to the election to support gold prices. There is also enough long-term uncertainty to keep gold prices lofty. That’s because no one really knows what a Trump presidency would look like. As a result, a Trump win would put pressure on the U.S. dollar and financial markets and send investors into the safe-haven arms of gold.
Everyone pretty much knows what a Clinton presidency would look like, because they’ve just had eight years of Barack Obama. And Clinton’s not going to deviate from that trajectory much.
