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LAWRIE WILLIAMS: Gold: One step forward, three steps back but recovering again

I had been planning to write on the results of the U.S Presidential election and its effects on precious metals prices, but as of today, a week after the event, vote counting in some states is still under way and calls for recounts and legal challenges still make the final outcome of who leads the so-called ‘free world’ potentially up in the air. On the face of things Joe Biden appears to have won the battle – but has he won the war?

President Trump has still not conceded, although he is under pressure to do so – even from some important members of his own political party - but his, and his country’s, propensity for litigation, means that it is entirely possible that the outcome may end up in the courts. With the judicial system in the U.S. in the hands of politically appointed judges – not least the highest court in the land, the U.S. Supreme Court – any litigation outcome is, to say the least, uncertain.

A cynic might well suggest that President Trump’s and his party’s, seemingly unduly hasty appointment of right-leaning Amy Coney Barrett to the vacant position among the nine Supreme Court justices thus giving the political right a majority thereon, may well have been the recognition in advance that this election result might well end up there. So any advantage that might be gained from having a right-leaning majority thereon could well prove to be important in relation to any decision the justices might come to if the final election result comes down to them.

While one has no wish to impugn the integrity of the Supreme Court members, the worry has to remain that any final judgement, if it comes to this, could possibly be construed as flawed if they find in favour of President Trump. This a huge ‘Catch 22’ situation. Half the population in a hugely divided nation will damn whatever final judgement they may make if it comes to the Supreme Court deciding on the eventual outcome of this massively rancorous election.

Again a cynic would point out that President Trump, and his advisers, had seen well in advance the apparent mood of the nation. Indeed he probably did far better on the day than he had actually anticipated.

He had told his followers to go out and vote in person on election day in full knowledge that postal voting would likely massively favour the Democrats, and took pains well in advance to suggest that postal voting was open to fraud, although there was little or no evidence of this. He then categorised in-person voting as ‘legitimate’ and much of the postal voting as fraudulent and based his legal challenges on this position.

With the American nation, and Trump followers in particular, seemingly hugely open to believing such ‘conspiracy theories’ the nearly half of the population that voted for him would never accept even the possibility of a Democrat victory. This has sowed the seeds of huge divisions in U.S. society. When historians assess the Trump Presidency in the years to come we suspect as outsiders they will see him as perhaps the most divisive President ever.

But what of gold and the other precious metals? Prices swung dramatically on the perceived likely results of the election. In the initial stages when it appeared as if Trump might be in the ascendancy – particularly when he held on to Florida with its 29 electoral college votes – the gold price tanked, bringing the other precious metals down with it.

When the postal votes were being counted, particularly in the key state of Pennsylvania, and it appe.ared that Biden would win the day, prices recovered dramatically on the grounds that the Democrats would unleash a massive coronavirus stimulus package .

And there the situation stayed up until there was an announcement that a 90%-effective coronavirus vaccine could be rolled out – possibly even before the year-end. Precious metals prices plunged dramatically with gold losing close on $100 at one time, and global equities surged upwards. The Dow was up over 1,000 points at one stage, although only ending up a little over 800 points by the time it closed.

Conversely stocks which had been benefiting from the virus growth fell - the NASDAQ ended up down 180 points on the day. As usual these things seemed to have been overdone with investors carried away by the prospects of a counter to the pandemic’s worldwide growth pattern.

Overnight reaction in Asian and European markets was more muted and gold and the other precious metals started to pick up with the former heading back towards $1,900 again, although erratically so. According to worldometers.info, which keeps a running country-by-country virus tally, the U,S. still recorded over 125,000 new virus cases yesterday and the country’s virus-related death toll was over 244, 000 and heading for the quarter of a million level. Sobering figures indeed. The new virus vaccine hasn’t yet been approved for general use, although it’s obviously a hugely positive development. But perhaps the euphoria over the possible control of the advance of the virus is still too early. Infections and deaths are still advancing.

Perhaps the possible virus control news should be treated in the same way as the U.S. election result – in the words of Yogi Berra ‘It ain’t over ‘til its over’!

10 Nov 2020 | Categories: Gold

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