Gold Price Rise in Run up to Election Reverses Sharply (for Now)

Gold Price Rise in Run up to Election Reverses Sharply (for Now)

A US election gold price special update.

At time of writing, the US election remains in the balance — it’s still too tight early on.

It may yet remain that way over the next few days.

What’s the US election’s effect on the gold price in USD terms?

You can see a multi-day rise in the lead up to the election below:

Gold Price in USD - Gold Price Movement

Source: tradingview.com

If you look closely at the tail end of the chart, you can see a large red bar — why was that?

Well, it could have something to do this report out of Kitco:

Gold Price Report - Kitco - Gold Price Go Up?

Source: kitco.com

If true, that 65% number may have spooked a few gold traders.

But in the grand scheme of things, it may not make any sense.

According to Jim Rickards, gold wins either way.

Rickards on the US election

He said recently:

If Trump wins, it’s reasonable to expect additional deficit spending along the lines we have already seen.

The Fed will have to monetise this debt to keep interest rates from rising. That debt monetisation will increase inflationary expectations, which drives the dollar price of gold higher. A Trump victory may also produce more Antifa-style violence in reaction, which increases the safe haven appeal of gold.

If Biden wins, not only will there be more stimulus-style spending, but there will be enormous pressure to enact the Democratic Party platform that includes guaranteed basic income, free healthcare, free tuition, free childcare, open borders and the Green New Deal.

These programs will cost tens of trillions of dollars that will also be funded with huge deficits and debt monetisation by the Fed. The inflation signal will be even stronger under Biden than Trump and gold prices will rise predictably.

So, the long-term picture for gold remains largely intact.

The US election — at least as far as spending and debt is concerned — is clearly a choice between lots and mammoth amounts.

Americans capable of civility?

There’s a lot of commentary out there that suggests this type of position is a bet on Biden and that position is a bet on Trump.

And it’s entirely possible that the sharp rise in the lead-up to the election might have been a ‘survivalist punt’ of sorts.

According to a recent Reuters headline though, Election Day is unfolding ‘smoothly, so far defying fears of disruption.

Perhaps proving that Americans are indeed at least capable of civility, despite what various doom-mongers predicted.

What about the gold price in AUD terms?

The price of gold in AUD terms is a tight range, as you can see below:

Gold Price in AUD - Australian Dollar Gold

Source: tradingview.com

Given recent history, it may be unlikely to break out of this range in the immediate future.

Despite the RBA’s tinkering.

Their entrance in the currency ‘race to the bottom’ wars with $100 billion in QE and a further rate cut position gold for success in the long-term.

The trouble is there are a host of conflicting factors out there.

After a double sugar hit of a generous federal budget and the just announced RBA policy settings — maybe the ASX 200 will stir to life again?

It too is range bound.

I suspect if the ASX 200 is to climb, the short-term gold price in AUD terms might suffer (unlike previously when both climbed simultaneously) as old thinking returns to investors’ minds.

For now though, all eyes will be on the gold price in USD terms as a victor emerges from US shores.

Or, it all descends into chaos.

Let’s hope that’s not the case.

Unless you are one of those gold investors driven by schadenfreude, of course.

On a final note, if you want to understand how Australia could is on track to become the epicentre for gold production (overtaking China), then I’d highly recommend you read this free report. Inside, you will get the macro picture for gold stocks in Australia and what comes next for the gold price in AUD terms.

Regards,

Lachlann Tierney

For The Daily Reckoning Australia