Gold prices after the US election
This year, gold prices have surged to record highs not seen since September 2011. This has left many investors wondering whether or not to buy the yellow metal. As Election Day approaches, uncertainty around the path of the pandemic (and associated government stimulus programs) continues to increase the value of precious metals. Keep in mind our advice come November and you—and your portfolio—may come out on top.
It’s no secret that gold, silver, and copper have been shining lately. As we dive into a gold-friendly decade, gold has been one of the best performers so far in 2020. Experiencing its longest stretch of gains since 2002, the price of gold has rallied for 9 straight weeks as of writing.
Thanks to the pandemic and a softer dollar, investors may be on the lookout for another gold-friendly era of major deficits, record low-interest rates, and Federal Reserve quantitative easing (QE) that may long outlast the current climate.
Since January, the price of gold has gained more than 30% so far this year. As one of the best-performing commodities, it has even outpaced the tech-heavy Nasdaq index, which has risen by “only” 18%.
This growth can be attributed to gold being a “safe haven” asset in uncertain times because it is significantly less volatile than other investments. According to recent BlackRock iShares data, this year’s inflows into physical gold ETFs stands at roughly $12 billion around the world.
If the likelihood of a potential “Blue Wave” increases, some experts suggest the US Presidential Election could lead to the top of the bull market this year. Likewise, if Donald Trump’s reelection odds decrease and a Democratic Sweep becomes increasingly likely, experts suggest investors keep an eye on precious metals in anticipation of the election in November.
Whether President Trump or Joe Biden take office, election years inevitably affect the US economy and gold. As we noted in our research earlier this month, gold tends to rally in September of election years before reversing to trade lower through the Presidential inauguration in January. This is primarily due to the fiscal stimulus and political uncertainty.
Plus, history shows that Democratic control of government can lead to rising gold prices. Within a month of Obama’s inauguration, gold rose nearly 16% and silver by over 27%. Exactly one year after that, gold had experienced a gain of 29.6% in the first year following his inauguration.
While few can deny Donald Trump has been good for Wall Street, the potential volatility for US stocks may be apparent on Election Day. As uncertainty surrounding the election and the pandemic continues to push the precious metal stock higher, some experts suggest gold prices will continue to hit record highs. In 2016, Trump’s surprise win caused gold prices to surge by nearly 5%.
While gold has hit a fresh all-time record high this year, some analysts warn that a Biden presidency and a coronavirus vaccine could drastically stunt the yellow metals rally. Other factors that could derail gold’s bullish trend include rising interest rates, bond yields, and a successful COVID-19 vaccine which may reduce the need for investors to seek out safe havens like gold.
If you’re wondering when to buy gold in 2020, some investors recently suggested buying now due to high potential returns in the immediate future. Our own analyst Medion Jim recently noted, “Investors continue to support gold on the uncertainty of economic and geopolitical risk.” However, constant vigilance is critical.
Will gold prices drop in 2020?
Just last week, The CEO of US Global Investors predicted that gold prices could reach an astounding $4,000 due in part to rising money stimulus. At the beginning of August 2020, gold prices soared above $2,000 per ounce for the first time.
Regardless of volatility, some experts recommend holding a gold allocation of 1% - 5% of an overall investment portfolio, and such a position may make even more sense against the current economic and political backdrop. Given the flexibility of the investment, you can hold the precious metal in a myriad of ways that can pay off in the long run. From buying gold-related stocks to the yellow metal itself, even a small position can have a big effect on overall performance amidst an unpredictable market.
Gold remains as volatile as ever. Even (or perhaps especially) in the face of an uncertain future, a little gold in your pocket—and your portfolio—can go a long way. Reach out today to see how we can be your trusted partner when it comes to trading gold in 2020 and beyond!