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What would a Biden presidency mean for gold?

October 23, 2020 - 7:20pm by Gary Wagner

First of all, I need to start off with a disclaimer. By no way am I endorsing either President Trump or former Vice President Biden in the following article. This is simply an attempt to forecast what market participants might see if Joe Biden is elected as the next president of the United States.

The last presidential debate has concluded, and the polls currently indicate that former Vice President Biden has a 10-point lead, which means that gold investors need to understand the possible impact of a Biden victory as it relates to gold pricing.

If history is any indication as to whether or not analysts can predict how gold prices will react, one simply needs to look at how gold prices moved in November 2016 when voters elected Donald Trump. Most analysts including myself believed a Trump victory in 2016 would be extremely bullish for gold and in the case of the 2016 election most analysts including myself, got it wrong.

As a gold analyst during the 2016 election, I witnessed gold prices immediately gaining $50 following the announcement that Donald Trump had won the presidential election. I also witnessed gold’s price encounter a 180° reversal. Gold jumped from $50 higher to $50 lower within hours after the election results were made public.

The chart above is a daily candlestick chart highlighting price action on November 9th when election results were announced to the public. On that day gold prices reached an apex of $1337 per ounce before selling off and closing at approximately $1265. To put simply traders witnessed the opposite reaction in gold than they had anticipated. Gold continued its downward spiral trading to a low of $1124 by the middle of December 2016 before prices recovered. By February 27th of 2017 gold traded to a high of $1265 roughly one week following the inauguration of President Trump.

If history has taught us anything it is to expect the unexpected. It has taught us that the economic models used to forecast price changes in stocks and commodities are not etched in stone. Which leaves me with the following take away; the probability that the outcome of the election will create unexpected results as it pertains to gold prices is high.

So, what would a Biden presidency mean for gold. Simply put it is not that easy to predict. Many analysts believe that a Biden victory would be extremely bullish for gold prices. This is a logical assumption but by no means can be taken as gospel. What history has taught us more than anything else is to expect the unexpected.

Wishing you as always, good trading and good health,

Gary S. Wagner - Executive Producer

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