Current market commentary by Markus Blaschzok for GoldSilberShop.de
The markets were extremely volatile in the past week of trading. The US dollar plummeted due to the election chaos, while everything else rose diametrically due to this depreciation of the greenback. While the USD index fell almost to a two-year low at 92 points, the euro-US dollar exchange rate benefited from this, rising to almost 1.19 US dollars to the euro. We had predicted that an election victory for Donald Trump would be followed by a stronger US dollar and a collapse in the gold price, while a victory by Joe Biden would result in a weaker dollar and a rising gold price. And so it was that on election night the dollar first showed strength and the gold price fell, as long as Trump’s chances of victory were high and Biden was ahead of him. But when the tide suddenly turned in favor of Joe Biden on the morning of November 4th, the dollar collapsed and the euro shot against the US dollar from a low of $ 1.16 to $ 1.19 in just four trading days straight up.
The US stock market also benefited from the weak dollar, so that the US stock index S&P 500 rose by 200 points and almost reached a new all-time high at 3,566 points. The price of silver fell to $ 23.20 on election night and has since increased by nearly $ 3 to $ 26. The price of gold fell to $ 1,882 by Wednesday morning, only to climb $ 80 to $ 1,962 in the next four trading days.
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The prospect of a Joe Biden win pushed the gold price up
Thursday’s Fed meeting was a non-event. The US Federal Reserve (Fed) has not expanded its total assets in four months, while the ECB had printed significantly more money than the Fed. The European Central Bank, however, has expanded its balance sheet total faster than the Fed since the shutdown crisis. However, the US Federal Reserve held out the prospect of expanding securities purchases in December so that total assets could grow again in the coming year, which should fuel a further rise in the gold price.
It seems that the US Senate will continue to be dominated by the Republicans. This would thwart Biden and Harris’s plans, curb the expansion of the government apparatus, despite a Democratic president, and possibly doom Washington to a standstill that would be good for the economy. It’s always good for the economy if politics doesn’t interfere. The planned tax hikes would be off the table and the US economy could continue to grow, while the planned spending programs and the expansion of the welfare state would also be slowed down. The scenario of a Senate with a majority of Republicans is even the least inflationary scenario, which is why the US Federal Reserve is likely to run its printing presses faster again, while a new shutdown aid program for the economy could be comparatively small. This will apparently only be adopted in the coming year. These are points that could still weigh on the gold and silver prices in the short term.
The price of crude oil rose in the past trading week, however, as Biden promised to implement the Green Deal and not only end the promotion of the fracking industry, but want to end this entire industry. This would take a great deal of supply from the world market, which should benefit the crude oil price in the long term. Overall, it remains to be seen who will ultimately win the US election. Depending on whether Trump or Biden remain president and how the legal dispute ends, this will have a massive impact on the further development of the US economy and the gold price. In the long term, however, it is already clear that the USA and the strength of the dollar will suffer massively from the election result and that the population is currently as divided as it was before the secession of the southern from the northern states. Gold is and will remain the only safe haven for the next few years!
The current US election will cause severe turbulence
The US dollar slumped dramatically last week of trading, with the price of gold rising significantly. The current election thriller in the USA, which is shaking the foundations of democratic elections and creating uncertainty in the markets, is the cause of this market turbulence. Challenger Joe Biden had surprisingly caught up at the end of the count in those states in which he was partly far behind and just overtook incumbent President Donald Trump. Trump’s attorney Rudy Giuliani announced a major legal battle to re-count the election and investigate what he believes is undemocratic electoral fraud, allegedly with hundreds of pieces of evidence across the country. The main points of contact for Trump’s campaign team are:
How long and how much will this election thriller influence the financial markets and the gold price?
In the US election of 2000, the dispute between Al Gore and George Bush, who had almost the same number of votes, was fought in the courts for 37 days. According to the US Constitution, all legal issues must be resolved by December 8th. The Electoral College will elect a new president on December 14th. To date, no new 46th president has been named as the winner of this election and votes are still being counted. Only on January 6th there will be a count of the votes of the Electoral College and the next US president will be announced. As soon as it is clear whether Biden or Trump will be the next president, the markets should calm down. The 46th President of the United States will be sworn in on January 20th. South Dakota Governor Noem said 70.6 million people who voted for Republicans deserve clarification and ensure there was a fair election.
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