In the end, it doesn’t really matter….
I have been asked a multitude of times what the outcome of this U.S. election will mean for gold, and by extension the entire precious metals complex, as our colleagues to the south prepare to vote in one of either Trump or Biden and my answer has been the same all along. It doesn’t really matter. But here for the sake of it, this is what I expect.
A few days before the US elections and many investors (despite last week’s plop) have decided it’s over. She’s done. Trump is done.
Now, let’s be clear: there could be a very big surprise come voting night. “The Donald” might pull this out of the bag by taking Florida. Or if the results are close on election night he could claim victory, opening a protracted legal quagmire. Maybe the Proud Boys will start a war in prime time with NFAC, livestreamed on FB. Dunno. It is, after all, one messed-up country these days. But here’s the betting line with just a few days out: Biden sweeps. Gold and silver owners you are going to like this very much.
The polls say this. Massive advance voting supports it. The virus suggests it. The infections over the past week of Mike Pence’s inner circle were a coup de grace, coming atop record daily spread levels at the end of last and this past week. Just when the president wanted to shift the focus onto the economy (“a Trump recovery or a Biden depression”) the bug took centre stage again.
Perhaps on a personal note you might find that there is reason to suspect one will be better than the other for gold prices but the truth is they will both be good for gold.
On one hand with Trump there is the status quo. More tax cuts, China-bashing continued deregulation, promotion of the O&G industry, financials and defense. And of course higher gold and silver prices as economic recovery continues to involve copious amounts of debt, debt and more debt.
On the other hand a Biden victory will most likely mean rolling back some of the Trump tax cuts on corporations, which will be viewed with some negativity. Also on the viewed negatively side will be the proposal to treat capital gains and dividends as regular income. Ditto his plan to increase the marginal rate on people earning over $400,000. But none of those moves are likely to take place until economic recovery is underway. More important, the market sees a Democratic win as clearing the way for another massive stimulus package in late January, now that relief before election day is impossible (which helped caused last week’s funk, albeit deservingly so in this writer’s eyes).
Before we make take a final bow here let us be reminded of the situation for precious metals long-term. I have opined that since 2002 the complex for precious metals has basically worked on a group of very basic fundamentals. They are:
1. Currency Depreciation
2. The Fear of or Threat of Inflation
3. Geo-Political Instability
4. Supply and Demand Variables
I have also ranted on about the notion that despite all of these fundamentals being strong and to some extent or another in place since 2002 that the gold and silver market themselves have essentially required triggers or “trigger events” that when viewed in hindsight offered a “spark” for the next rally, cycle or climactic moment.
9/11
US Dollar devaluation
Housing Crisis
The introduction of the SLV ETF and the subsequent removal of some 130 or so million ounces of silver from circulation in 2005
Quantitative Easing
Global Debt Crisis
China/US Relations
Threats to Oil in the Strait of Hormuz
Covid-19
The list goes on and on and essentially all of these things in some respect or another are fuel for an already very large fire burning. A fire so enormous that the world has more than doubled their ownership of gold and silver, central banks have been net buyers of gold since 2009, and places such as India, China, Russia, France, Italy and others on the other side of the world have been adding gold to their net reserves in preparation for what their governments know is coming.
This threat is almost inevitably unspoken by the so-called “sane” economies of the world and hidden from the prying eye of some 90% or more of the people of these nations, such as gold ownership often is. Rather we speak of gold ownership as primitive, naïve, without dividend, or of little practical value and that is your fine economic structure at work trying to define for themselves why it is they wake up every day and continue to drink the kool-aid in the form of paper derivatives, fiat currencies and delightful tabloid fodder about the best paper companies to own and trade while these same central bankers add to their stockpiles of actual hold in your hand physical gold and now silver.
Remember how good gold and silver have already been:
In a short while we will know the outcome of the contested battle for the most powerful position in the world and no matter the outcome gold and silver are going higher. They may falter and present a couple of great short-term buying opportunities post-election but be prepared as this situation develops. It will be exciting for those looking to hold physical silver and gold.
Yours to the Penny,
Darren Long