LAWRIE WILLIAMS: Who will win the U.S. Presidency and what will it mean for gold?
Tomorrow’s U.S. Presidential election is turning into a travesty. Gerrymandering in the true sense of the word is NOT any longer a significant factor in U.S. elections, despite the Trump camp’s assertion, without any evidence, that postal voting is open to fraud. Postal votes tend to favour the Democrats so the final election result could hinge on the percentage of postal votes which the Republicans can have disallowed on technicalities. The election looks to be too close to call so a rejection of even a small number of Democrat-leaning postal votes could make Trump victorious, as could voter intimidation and just making voting more difficult for the poorer section of the community by a lack of polling stations without forcing some people to travel enormous distances to vote in person in some Trump favouring and battleground states.
Americans are fond of casting aspersions on election results in less-advanced nations, or in those with regimes seemingly hostile to U.S. values. But in this Presidential election it looks like the in-power Republican Party is, in many areas, learning from an indirectly vote-rigging agenda under the guidance of the incumbent President. The Democrats could well take the Senate regardless. This has to be the dirtiest U.S. election – perhaps ever - and could make a divided nation even more so.
Even so, the current polls and betting odds still probably favour a Biden/Harris victory – but in our analysis only just. Our best guess is the Biden/Harris combination will, at least initially, secure a 276 to 262 victory in the Electoral College – but close enough for Trump to challenge the result, and could see a Trump victory if only one of the states where we have assumed a Democrat majority opts for Trump instead. If the results on the day are as close as we predict it is unlikely that Trump will concede and the battle for the Presidency could spill over into 2021 – perhaps even past the official inauguration day date of January 20th. Trump may thus rely on a Supreme Court decision to decide the outcome and he has packed the Court with right-leaning judges, but we refuse to believe that these justices will necessarily rule along party political lines!
What does all this mean for gold? Any continuing doubt as to who will be the next President has to benefit gold’s safe haven appeal, but any delay in deciding who will be the nation’s next President could lead to further delays in the decision on a new economic stimulus package to combat the virus-induced recessionary tendency. Such delays could drive equity markets and the gold price downwards.
On the other hand a decisive victory for either Presidential contender would remove the uncertainty over the proposed stimulus. The Democrats seem to favour a bigger spending package than the Republicans, so in theory a Biden undisputed victory should favour equities and gold, although a Democrat-dominated Administration, particularly if they win the Senate, could lead to tax increases which might mitigate any equity advances. A Trump victory could also see a rise in both gold and equities, even if a slightly smaller stimulus package is forthcoming.
Overall therefore we see tomorrow as being positive for gold whatever the result. Gold and equities markets in both Asia and Europe have already moved up a little this morning, although whether this trend will survive through the day, and particularly in the U.S., remains to be seen. So far the dollar index is just about flat. We certainly wouldn’t rule out our call that $2,000 gold, or thereabouts, might be seen before the year end, but this might be seen as misguided optimism!
02 Nov 2020 | Categories: Gold