As I’ve noted recently, the prospects for gold remain excellent. The yellow metal has demonstrated sustained strength since it became apparent in early 2019 that the economy remained fragile even after a decade of generous monetary policy. That overall pattern of strengthening was further energized in the second quarter of this year when the pandemic’s onset cued the return of Fed quantitative easing and record deficit spending.
Despite the generally robust expectations for gold, many now are pondering how the results of the upcoming election potentially could alter gold’s fortunes. What likely will happen to gold during four more years of President Trump? Alternatively, what could a Biden presidency mean for gold investments?
Some observers believe there will be very little difference in how gold reacts in the years to come, regardless of who wins in November. That’s because for all of the perceived disagreements in platform and ideology between the candidates, the underlying fiscal and monetary agendas will remain largely the same. From the singular perspective of anticipated gold performance, that translates into good news for the metal.
Whether Trump or Biden, Federal Debt Expected to Reach Unfathomable Heights
According to an assessment by the Center for a Responsible Federal Budget (CRFB), government fiscal irresponsibility will remain the rule regardless of who wins the White House next month. In light of that expected reality, gold should continue on its upward path.
In a write-up on the CRFB report for Yahoo Finance, Rick Newman details how the federal debt will continue to skyrocket under the stewardship of either Trump or Biden. A win by Trump would add $5 trillion more to the federal debt by 2030. The debt recently surpassed $27 trillion, which means it now represents 98% of the country’s gross domestic product (GDP). If Trump wins and successfully implements his agenda, it’s estimated the debt would grow to a stunning 125% of GDP.
Not to be outdone, Biden’s plans for the country would raise the national debt by another $5.6 trillion. If that happens, the debt would climb to 128% of GDP.
The expectation of continued massive deficit spending driving the debt ever higher no longer seems to raise eyebrows on either side of the political dividing line. In what has become a kind of “bizarroworld,” the topic of reducing the national debt – once a compelling and resonant campaign theme – essentially is regarded now by Washington as the irresponsible course when it comes to fiscal policy.
For her part, analyst and former Federal Reserve advisor Danielle DiMartino Booth believes the current fiscal outlook – along with the Fed’s declared monetary policy agenda – bodes well for gold. In fact, DiMartino Booth says, it’s precisely that fiscal outlook which makes it politically impossible for any president to take meaningful steps designed to bring the Fed back to earth.
“I don’t know any leader right now being considered to run the country that would have the strength given the (present) fiscal backdrop,” DiMartino Booth told Investing News. “Given how deep the recession is, and how prolonged it looks like it’s going to be — who would even begin to try and rein in the Fed right now, because they need the money printers, so to speak.”
Analyst Lobo Tiggre of Independent Speculator also spoke to Investing News about the current fiscal and monetary landscape and its anticipated effect on precious metals. Tiggre said the prioritization of both fiscal stimulus and significantly accommodative monetary policy not only in the U.S. but around the world is a great sign for metals and commodities, more generally.
“We will see a commodity supercycle with the precious metals, the energy commodities and industrial metals all surging higher,” Tiggresaid. “Either because the economy recovers and the raw materials of the economy are needed, or because it doesn’t, and the stimulus really opens the inflationary floodgates and includes infrastructure plans and other investing that would be good for commodities.”
Civil Unrest Likely to Persist Regardless of Election Outcome
Adding to the likelihood that precious metals will remain in favor is the continued climate of political and social unrest plaguing the country. Casual observers might think the protests and riots consuming so much of the world’s attention right now will instantly disappear should Biden win the election. That is by no means a foregone conclusion, in my opinion. Recently, Black Lives Matter Los Angeles co-founder Melina Abdullah told ABC News that she’s not supporting Biden because he’s part of the same “violent white supremacist” system she claims exists currently. One could infer from her sentiment the same forces energizing much of the civil unrest we’re seeing right now will remain intact regardless of who wins in November.
Former Fed advisor Danielle DiMartino Booth also thinks the turmoil will continue and that gold will benefit further as a result. “Gold and disruption go hand-in-hand,” she said in her remarks to Investing News. “So to the extent that there was continued and increased social unrest after the election, that I think would benefit gold prices for sure.”
Here’s the bottom line: There’s no reason to believe the underlying fundamentals driving gold will be altered significantly based on who emerges victorious November 3. Extremely dovish monetary policy and massive fiscal stimulus are expected to remain a part of the national economic landscape for years. Also, there’s good reason to believe widespread civil unrest will continue even if the presidential administration changes. Given these conditions, there’s little reason to anticipate a change to the existing pro-gold environment.
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