Are precious metal investors at stake in the US elections?

The coronavirus outbreak, economic blockades, and multi-million dollar bailout efforts by central bankers have dominated markets in the past three months. However, as the blockades are gradually closed, investors will begin to focus more on national political events. The 2020 presidential elections to the White House in the United States are approaching.

The once strong economy that President Donald Trump hoped would propel him to re-election has collapsed. He has also received massive criticism from the media about his handling of the COVID-19 crisis. It has affected his numbers in the polls.

Still, the data shows that Trump has a good chance of defeating Joe Biden, who repeatedly stumbles without benefiting from the situation.

RealClearPolitics currently shows that Trump is at +8.4 points (50.3 to 41.9) against Biden in terms of their chances of winning the White House. 

How could US elections affect the stock market?

The fight for control of the United States Senate could be just as important for investors.

Wall Street could probably face a Biden victory and Republican control of the Senate. A divided government forces compromise and make radical changes in taxes and regulations.

But if Democrats gain control of the White House and both houses of Congress, the prospect of the political left wielding unchecked power could cause the stock market to stumble. Investors would flee to safe havens, including gold and silver.

The last time a Republican was reelected was in 2004. At that time, President George W. Bush opposed Democrat competitor John Kerry. The gold and silver markets performed well in the second half of 2003 and made modest gains in 2004. The metals were in the early stages of a significant bull market.

In 2008, when Barack Obama and John McCain were competing for the White House, the financial crisis hit all markets considerably. Silver crashed along with virtually every other asset during that frightening collapse. Gold, however, endured the storm quite well and ended up making a profit.

The metal market under Trump’s administration

Donald Trump’s surprising electoral victory in 2016 ignited a fire under the stock market and put some brake on demand for precious physical metals.

Demand for bullion coins, bullion, and collectors’ items has remained subdued in recent years, compared to President Obama’s great years. However, the coronavirus outbreak triggered a new wave of purchases.

Gold prices have now risen since Trump’s victory and inauguration. 

Unlike stocks, precious metals tend to benefit from trading fears. If democrat Biden wins the White House in 2020, many investors may become defensive.

Stefan Gleason, president of the Money Metals Exchange, stated that in the late summer or early fall, the gold and silver markets might begin to show an inverse correlation with trends in electoral prospects. However, the explosion of public debt and the infinite quantitative easing of the Federal Reserve will remain in motion regardless of who wins. 

The only question is whether the election results accelerate threats to the value of the US dollar.

There is no viable political solution to the current crisis. There will be no return to normal in the next four years. The fundamental reasons for investors to own precious metals will remain important.