While everyone holds their breath in the face of the uncertainty that hangs over the outcome of the American elections, gold, meanwhile, continues to chart its course, benefiting from both a possible challenge to the result across the Atlantic and the context of a pandemic which leads central banks to adopt dovish policies which are likely to encourage demand for gold as a store of value. It is dovish’s policy to promote economic growth by all means, and inflation is not a concern. In this context, many analysts are engaged in predictions on the yellow metal. We went to see the different trends of the oldest safe haven to offer you a summary of the scenarios and a look back at certain historical episodes. When gold finds itself at the heart of the American elections, zoom in on the major trends of the precious metal at the heart of political turmoil.
(As of this writing, the official result has not been announced and Joe Biden, the Democratic candidate, looks close to victory with 264 constituency seats out of the 270 required to win)
Warning : This article is brought to you by the company Vera One. Crypto investments are risky by nature, do your own research and invest only within the limits of your financial capacity. This article does not constitute an investment invitation.
Once Upon a Time in America: The American Gold Rush, an Enduring Story
Let’s go back on the history of the American gold rush, which so much inspired the adventurers of the XIXth century and the filmmakers in the most famous westerns.
It must be said that this little reminder of history makes us aware of the importance that Americans give to the precious yellow metal.
The gold rush began in 1799 in North Carolina : after the discovery of a gold nugget of about 8kg in a farm property, the adventure continues and spreads in the State of Georgia, which sees thousands of men pouring in in the hope of finding the precious. Pusique it was in 1829 that the great gold-seeking movement is in full swing, monstrous discoveries are made at North Georgia Moutains.
However, it is in California that the movement is amplifying since the California Gold Rush or Conquest of the West becomes a global movement, and will help create the myth of the American dream. It was to these arid western lands that the then US government and many Europeans traveled the lands from the Mississippi River to the Atlantic. Thousands of pioneers as they were called at the time crossed the plains of America in search of the precious metal. In short, this gold rush did not have only positive consequences since disease, famine and malicious behavior marred the phenomenon. The pioneers looked for profit above all, before thinking of their cronies.
Today, it’s another gold rush that we’re talking about, but it helps to put into perspective the origin and historical interest of Americans in the precious yellow metal.
The gold and the dollar: I love you neither
Gold and the dollar have advanced in reverse correlation for many years, but this has not always been the case.
In fact, this summer, the ounce of gold hit a record high, far exceeding the dollar, and following the curve of a well-named brother, Bitcoin (BTC). In short, back to the relationship between gold and the dollar: no one is supposed to ignore that when the price of the yellow metal increases, the dollar decreases because gold automatically becomes cheaper for buyers with other currencies. And this is the same for the Euro, which follows much the same path. In short, when the US economy is attractive, gold falls, and if not, it keeps rising.
So, for all budding or seasoned investors, avid readers of Cryptocurrencies, the lower the dollar, the more attractive it is to invest in gold. The American context being that of a heavy budget deficit, accompanied by a vast stimulus plan of the Trump administration reaching $ 300 billion, or indeed 15% of GDP, I let you imagine the degraded landscape of our neighbors across the country. Atlantic.
Gold hit its highest levels for 6 consecutive weeks, much like Bitcoin, which ignites the cryptosphere by reaching $ 15,000 on the eve of the result of the American election, which was very popular with investors.
As the dollar hits its lowest level in two years, a phenomenon accentuated by the forecasts of some investors who would give Joe Biden the winner. Indeed, analysts predict that a victory for the Democratic candidate would pave the way for a fiscal stimulus package larger than that anticipated by Donald Trump and therefore an unprecedented rise in the price of gold.
Certain analysts like Ole Hansen thus predict that the conjunction between a victory of Biden and a Republican dominance in the Senate would be likely to eliminate a large part of the political uncertainty and thus to boost the performances of the precious metals with stocks rising sharply and a sharply declining dollar.
So this weekend, the ounce of gold closed at $ 1949 in New York, rising more than 2.6% and nearing its summer level. Results of a hotly contested US election, and therefore uncertain, the Fed is pushing to deploy even more monetary stimulus, and lets us predict still good days for precious metals including gold.
Trump or Biden: How can gold change?
While for weeks investors have been following elections that have continued to sow discord in the financial markets, notably by announcing that the outcome could cause the markets to collapse, many analysts are betting that the dollar will fall and gold will rise.
Already in 2019, Donald Trump’s tweets were pushing gold and it has not stopped rising for several years.
So, after a sharp rise this year and during Donald Trump’s presidency, what would a victory for Joe Biden mean?
On the contrary, in the event of Donald Trump’s re-election, the dollar could well tend towards an increase, driven by a low corporate tax likely to benefit investors as well as a weakening of precious metals and in particular of base metals drawn by trade tensions with China.
In a mixed scenario, where we have Joe Biden at the head of the United States and a Republican Senate, the financial markets could interpret this scenario as a dead end for the various reforms underway, and thus create only small jolts.
Let’s take a quick look back at the frenetic swings of gold during the previous US election in 2016:
- During the night of November 8 to 9, 2016, the gold price jumped from $ 1,270 per ounce to $ 1,320 between midnight and four o’clock
- It must be said that the election of Donald Trump was a surprise and the financial markets are not fond of it … surprises
- Investors who had not anticipated such a scenario then took refuge out of risky investments, and you know the saying: in this case, the oldest safe haven remains gold even if it tends to be overtaken by Bitcoin
Now all predictions are possible. JP Morgan analysts, for their part, anticipate two possible scenarios:
- Blue wave for Democrats could cause gold price to jump 5% and ignite the yellow metal because the markets react badly to a tightening of the tax system
- If Joe Biden wins but Congress is Republican, then analysts forecast a more moderate increase of about 2%
- In the event that Donal Trump comes back for another term, then the gold price could drop 5% in parallel with a revaluation of the dollar.
To note that the famous investor Warren Buffet, yet fiercely opposed to gold for many years invested in Canadian gold producer Barrick Gold during the second quarter sending an important signal to the entire ecosystem.
So, in your opinion, Trump or Biden? Place your bets !
How about you, when will there be a gold rush?
As many markets have gone into a wait-and-see mode, you may be wondering if now is the right time to invest in gold?
The price of gold seems to hesitate, just like that of silver, remained in suspense in the face of the uncertainty of the American election but seems to go up as the announcements of the American TV channels.
If in the short term, it is therefore possible to observe increased volatility, it is a safe bet that the outcome of the US elections will change the gold course only slightly due to the very marked uncertainties in the US market.
Anyway, if you want to know how to invest safely and securely in gold today, while participating in the digital transformation and the tokenization of raw materials, we have the solution for you: VeraOne, THE French gold-based stablecoin that allows you to combine the best of both worlds.
It’s simple and intuitive, and everything is explained in this video:
Thanks to the ecosystem of which it is a part, VeraOne’s mission is to promote instant, free transfer without any golden intermediary between individuals around the world. And if you have followed correctly, we talk about it regularly in the columns of the Alternative Investment Tribune.
So, if you too have decided to closely follow the outcome of the US election while considering your alternative investments, don’t hesitate to read us every weekend. And so, make your confinement a golden opportunity!
Karen is passionate about new technologies in general, and blockchain in particular! Finding out about trendy news, the latest market developments and the treasures of the ecosystem, she is happy to help you discover this universe in all its colors.