As the 2024 presidential election in the United States approaches, markets are preparing to react to the results of the race between Kamala Harris and Donald Trump. What could be the impact of the 2024 US Presidential Election on the price of gold?
The Effect of the Election on the Price of Gold
Presidential elections in the United States have always had a significant impact on the financial markets. During past election cycles, we have seen how gold behaves in a volatile way, depending on the candidates' promises and their economic policies.
Gold Under Trump: A Complex Relationship
Gold showed a mixed behavior during Trump's presidential term (2017-2021). Initially, his focus on reducing taxes and strengthening the U.S. economy caused a rise in the stock market and strengthened the dollar, which put downward pressure on the price of gold. However, as time passed, his protectionist policies, along with the trade tensions with China and the sanctions on Iran, contributed to an increased demand for gold, therefore boosting its price.
In addition, the COVID-19 pandemic, and the economic stimulus packages released by the U.S. government, contributed to weakening the dollar and increasing the investment inflows into gold as safe haven, which led its price to record-high levels in 2020.
As a result of the above, the price of gold increased notably during Trump's term, raising from USD $1,302 per ounce in 2017 to USD $1,828 per ounce in 2021, an appreciation of 40% during the four years of Trump’s term.
In our opinion, a second Trump term might reactivate some of the protectionist policies, therefore generating uncertainty in the financial markets and benefiting gold.
Gold in the Biden Administration and the Future with Harris
During Biden's presidency, gold faced a different dynamic. The high levels of post-pandemic inflation and the geopolitical tensions, especially with Russia and the Middle East, maintained the demand for gold high. If Harris becomes president, she is likely to maintain a Biden-like approach to foreign and economic policy, which could continue to keep international tensions high and influence the demand for the golden metal.
Furthermore, the measures to combat climate change and its impact on the energy sector could have long-term implications on the global economy, and therefore, on gold and other industrial metals key to the energy transition, such as silver, palladium, platinum and copper.
Finally, the excessive level of public debt in the United States and the growing budget deficits over recent years are fertile ground for the continued weakening of the dollar against gold. Investors' expectations will be placed on the Federal Reserve's actions in connection with the country’s monetary policy and inflation control measures.
Two Visions, One Destiny?
The result of the 2024 US presidential election will have a direct impact on the price of gold, as it has happened in previous cycles. If Trump returns to the White House, we are likely to see a return to protectionist policies and greater geopolitical instability, which might increase the gold demand.
On the other hand, a Harris presidency would likely maintain a more stable and less protectionist policy, although the military global tensions and the lack of fiscal discipline might contribute to scenarios of uncertainty and to the weakening of the dollar, which would have a positive impact on the price of gold.
Based on the above, it is crucial to pay attention to the stability of the dollar, the actions by the Federal Reserve and the foreign policy decisions to be made by the next president, Irrespective of who wins the election, it is clear that gold will continue to be a fundamental asset to diversify portfolios and protect oneself from volatility, especially in times of political and economic uncertainty like those we currently live in.
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