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LAWRIE WILLIAMS: Gold price swings dramatically on U.S. election fortunes ebb and flow

The U.S. Presidential election is not yet over decisively and the gold price has been following the swings and roundabouts closely.  When President Trump appeared initially to be in the ascendant in  most of the battleground states and had won Florida, the gold price dipped sharply, but when the mood changed to a likely Biden victory as the millions of mostly Democrat postal votes were counted, the  gold price took off to the positive and, as I  write, was powering up through the $1,920 level.

President Trump and his advisers had obviously foreseen this likelihood and his much-forecast playbook took off as he had commented beforehand.  First he claimed victory well before the final votes had been tallied, and then as the mostly-Democrat-leaning postal votes were being counted he pushed his postal vote fraud agenda, without any evidence thereof,  He then sought to have postal vote counts stopped or contested in those states where these votes threatened to overturn an initial on-the-day Republican lead.  Tinpot dictators and autocratic administrations everywhere will take heart from the U.S. election disarray.  If the world’s No.1 democracy’s election descends into contentious accusation how much more so will vote-rigging prosper worldwide?

We assume President Trump will not concede defeat, that is if former Vice-President Biden appears to be ahead, unless or until all his legal challenges are settled.  This is an uncomfortable situation for the U.S. people who will effectively remain in political limbo until the situation is finalised.  Even then, if Biden comes out victorious, he may find his policies blocked given that it appears that the Republicans remain in control of the Senate – at least for another two years.

President Trump had judged the likely voting outcome and nuances well from his point of view.  As a rule Democrats were more concerned about the virus spread – and perhaps justifiably given the record number of new cases and deaths recorded yesterday.  Thus there was always likely to be a Democrat-oriented postal vote majority with the Dems more reluctant to vote in person on the day for fear of picking up the virus, while the virus-denying Republicans were much more likely to turn out in person on the day.  President Trump had recognised this well in advance, and had even promoted the opinion among his followers, and had thus paved the way for challenging the already well-established postal vote system.  Thus if anyone could be accused of STEALING the election result it would be the sitting President if any of his challenges are upheld and influence the final outcome.

So, although it is increasingly looking as if Joe Biden could win the Presidency, assuming the Trump challenges are not upheld, there remains a major degree of uncertainty over the eventual outcome which could take weeks, if not months, to be settled.  One suspects the gold price will continue to be volatile with the ebb and flow of the challenges, but overall we see this uncertainty as a positive for precious metals.  Our prediction that $2,000 gold could be reached again before the year-end certainly remains a possibility.

Meanwhile there is an FOMC meeting under way.  Given the continuing uncertainty over the final destination of the Presidency, one suspects that any ensuing pronouncements will have little impact, although the Fed’s views on the direction the economy is taking should carry some weight regardless.  One doubts that given the current electoral circumstances any projected changes in the likely interest rate policy and inflation targets will be forthcoming at this meeting and we will have to wait for the January meeting – due at the end of the month shortly after the official Presidential inauguration date, assuming the Presidential outcome is settled by then.  Even then this may be too soon to make any lasting decisions.

05 Nov 2020 | Categories: Gold

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