What Will a Biden Presidency Mean for Gold Prices?

What Will a Biden Presidency Mean for Gold Prices?

Now that the presidential transition period has begun, attention turns to a Biden presidency and what it may mean for gold prices in the medium term. Here, we’ll assess pre-election predictions from market analysts and take a detailed look at how Biden’s policies may impact gold prices in 2021.

Previous Market Predictions

The 2020 US presidential election was one of the most unpredictable in recent memory. Prior to Election Day, economic indicators such as the S&P 500 predicted that president Trump would be re-elected. This is because stocks were higher in the three-month period before the election and his economic policies had been successful. After all, during the second half of 2019, the S&P 500 generated returns of more than 50% and unemployment dipped below 4% at the start of 2020. However, with Biden holding a national poll lead, uncertainty dominated the financial markets in the days before the vote.

In fact, because the race was so hotly contested, gold rose in value sharply prior to the electionas investors flocked towards the safe-haven metal and some market analysts predicted gold would rise above the $2,000/ounce level with potential for an all-time high by inauguration day.

How Did the Gold Market React to a Biden Win?  

The presidential race took several days for US media outlets to call. But, when trading opened on November 9 (almost a full week after Election Day), gold prices rose sharply, with gold futures gaining 0.56% and trading at $1,962.15/ounce.

This price rise was caused by the fact that, although the senate race remained undecided, traders were anticipating that a Democratic president would opt for larger stimulus packages and a more dovish central bank approach, which would likely cause the dollar to fall in value.

However, since major media outlets called the result in favor of Biden, the price of gold has slowly tumbled and the outlook for the market now looks bearish. Although gold remains above the $1,800 level of support, the price of the precious metal continues to retreat and on November 24 it fell to its lowest level since mid-July.

Predictions for the Future

Although the price of gold had been steadily rising during the first Trump presidential term, market analysts believed that his re-election would have caused further volatility and uncertainty in the gold markets. However, there’s little evidence that the switch to a Biden presidency will cause a greater degree of market certainty and stability because there isn’t a clear relationship between the price of gold and the election outcome based on whether the president is a Democrat or a Republican.

Looking to the future, though, Biden’s continued support of quantitative easing measures means that gold prices should react favorably to his policies in the coming months and years. As a result, depending on the underlying economic and financial conditions, gold may have an explosive upside in the medium term as investors will turn to gold in an attempt to hedge against market uncertainty.

Although the current market outlook is uncertain, gold’s appeal will likely depend on the outcome of the Senate run-off in Georgia this January. If Democrats win both seats and regain a majority in the Senate, fiscal spending will likely edge higher and we should be braced for a fall in the US dollar, which will cause gold prices to rise. Although gold prices are currently bearish, the Senate runoff will likely determine the asset’s outlook and all-time highs are not out of the question just yet.

 

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The Daily Coin

Rory Hall, The Daily Coin and Gospel News Network. Beginning in 1987 Rory has written over 1,400 articles and produced more than 500 videos on topics ranging from the precious metals market, economic and monetary policies, preparedness as well as geopolitical events. His articles have been published by Zerohedge, SHTFPlan, Sprott Money, GoldSilver, Gold Seek, SGTReport, and a great many more. Rory was a producer and daily contributor at SGTReport between 2012 and 2014. He has interviewed experts such as Dr. Paul Craig Roberts, Dr. Marc Faber, Eric Sprott, Dr. Warren Coates and Peter Schiff, to name but a few. Don't forget to visit The Daily Coin and Gospel News Network to enjoy some of the best economic, precious metals, geopolitical and preparedness news from around the world.