By Michael J. Kosares
Founder, USAGOLD and author of The ABCs of Gold Investing – How to Protect and Build Your Wealth with Gold
“Gold prices have enjoyed a hefty climb so far this year as the market continues to guess the pace and timing of the next U.S. interest-rate hike, but the battle for the U.S. presidency is set to take center stage as Election Day nears. And it doesn’t matter if Republican Party nominee Donald Trump or Democratic Party nominee Hillary Clinton moves on to be the next president of the United States—gold is likely to come out a winner, George Milling-Stanley, head of gold investment strategy at State Street Global Advisors.” –– Myra Saefong/MarketWatch/10-19-2016
Gold is not just an inert metal, it is also an indifferent metal. It doesn’t care who wins the election. It is apolitical – one might even call it politically agnostic. In the end, it will respond to the macro-economic situation globally as it unfolds no matter who sits behind the desk in the Oval Office. It will assume, as it has in the past, that presidents can only do so much no matter what political agenda he or she intends. Washington, it says, is not Mount Olympus where the gods dwell, but the place where a mere mortal will take the stage January 20, 2017 – for better or worse.
Yesterday, Bloomberg posted a somewhat unbelievable headline for those of us who still adhere to a more or less classical view of economics:
Central bankers rejoice: There are signs that inflation is actually arriving
A decade ago, the posting of such a sentiment would have been full-proof that economic policy makers had finally gone collectively mad. Now it is greeted with enthusiasm amongst the mainstream media and Wall Street as well as apparently (if Bloomberg is right) within the Federal Reserve and the rest of Washington. This might fall under the category of being careful what one should wish for, or it might be just another piece of hopeful propaganda. And then again, the hoped for incipient inflation might simply turn out to be another in a long line of non-starters.
In the end, the same intractable demographic problems outlined here at length over the past several weeks will greet the next president day one of his or her presidency. The baby boomers will continue to eschew spending and attempt to save for retirement. The succeeding generations will continue to be mired in student debt and low-paying jobs that make it difficult to own a home and thereby pump up general demand. And Congress and Washington D.C. are likely to slip into the same institutional tension that has gridlocked the nation politically and economically for more years than any of us care to count.
The combined effect will be continuing weak demand, disinflation and the accompanying systemic risks. Secular stagnation, as some have come to call it, will remain a steep hill to climb for the next president. Should we hit another rut in the road as we did in 2007-2008, gold will be there to help its owners pick up the pieces. It doesn’t care who wins the election and it is indifferent as to which presidential candidate’s name will be attached to the next economic crisis. We might get a bump in one direction or the other after November 8th, but thereafter gold will likely settle again into trends driven by the big, overarching themes dominating all the financial markets.
One man’s opinion. . .and all I care to say publicly about the upcoming election.