Trump vs. Biden: What's at Stake for Precious Metals Investors? / Commodities / Gold & Silver 2020
The China virus, the economic lockdowns, and themulti-trillion-dollar rescue efforts of central bankers have dominated marketsover the past three months.
However, as lockdowns gradually lift and the 2020 election drawsnearer, investors will begin to focus more on political developments.
The once-strong economy that President Donald Trump had hopedwould propel him to re-election has collapsed. The President has also taken atremendous amount of heat from the media over his handling of the COVID-19crisis, and that has hurt his poll numbers.
Despite these headwinds, polls show Trump still has a goodchance of defeating a stumbling and bumbling Joe Biden.
The opinions of pundits and pollsters carry far less predictiveweight than the opinions of people who are actually putting their money on theline. The RealClearPolitics betting odds currently show Trump standsat +8.4 (50.3 - 41.9) vs. Biden in terms of his chances of winning the WhiteHouse.
Just as important for investors could be the fight for controlof the U.S. Senate.
Wall Street could probably stomach a Biden win and a Republicanhold of the Senate. Divided government forces compromise and makes radical taxor regulatory changes unlikely.
But if Democrats win control of the White House and bothchambers of Congress, the prospect of the political left wielding uncheckedpower in Washington could send the stock market reeling and investors runningto safe havens including gold and silver.
The last time a Republican was up for re-election was 2004.Incumbent President George W. Bush faced off against Democrat challenger JohnKerry.
Gold and silver markets performed well in the second half of2003 and made modest gains in 2004. The metals were in the early stages of amajor bull market.
In 2008 (when Barack Obama and John McCain were vying for theWhite House), the financial crisis hit.
Silver got slammed along with virtually all other assets duringthat infamous autumn. Gold, however, weathered the storm quite well and endedup putting in a gain for the year.
The stunning election victory of Donald Trump in 2016 lit a fireunder the stock market and put something of a damper on demand for physicalprecious metals.
Demand for coins, rounds, and bars remainedsoft over the last several years compared to the heady years under PresidentObama – until the coronavirus outbreak triggered a large new wave of buying.
Gold prices are now upsince Trump’s election win and inauguration, while silver has recently climbedback toward break even for the Trump era.
Unlike stocks, precious metals tend to benefit from the “fear”trade. If a Democrat (presumably Biden although he’s not yet officially thenominee) wins the White House in 2020, a lot of investors may decide to hunkerdown and get defensive – especially if a “blue” wave shifts the balance ofpower in the Senate.
By late summer or early fall, gold and silver markets may beginto display an inverse correlation to trends in President Trump’s and the GOP’selection prospects. However, larger macro forces now in motion – namely,exploding government debt and infinite Quantitative Easing from the Fed – willstay in motion regardless of who wins.
It’s only a matter of whether the election results acceleratethe threats to the value of the U.S. dollar and dollar-denominated IOUs.
There is no viable political solution to the current crisis.There will be no return to normalcy in the next four years. The fundamentalreasons for investors to own precious metals will remain compelling.
Therefore, if the GOP keeps the White House in 2020, it’s notnecessarily good news for Wall Street and bad news for gold bugs.
Recall that when George W. Bush won re-election in November2004, gold was trading at a mere $450/oz. The money metal went on to hit arecord $1,000/oz in early 2008.
Over that same period, silver advanced from under $8/oz to over$20/oz. Importantly, precious metals vastly outperformed the stock marketthrough the four years of Bush II’s second term.
Do elections matter? Of course. But they don’t necessarily makeor break bull markets for any asset class, including precious metals.
Stefan Gleason isPresident of Money Metals Exchange, the national precious metals company named 2015"Dealer of the Year" in the United States by an independent globalratings group. A graduate of the University of Florida, Gleason is a seasonedbusiness leader, investor, political strategist, and grassroots activist.Gleason has frequently appeared on national television networks such as CNN, FoxNews,and CNBC, and his writings have appeared in hundreds of publications such asthe Wall Street Journal, Detroit News, Washington Times, and National Review.
© 2020 Stefan Gleason - All Rights Reserved
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