Market Participants Wait With Abated Breath

November 6, 2018 - 5:16pm

 by Gary Wagner

Traders and market participants are quietly waiting to hear results from today’s midterm elections. In possibly one of the most important midterm elections held in recent history, the net results could have a profound impact on the financial markets.

This election will determine whether or not the current administration and the Republican-led House and Senate will continue to have total control, resulting in the ability to move president Trump’s agenda and policies into law at a breakneck pace.

As reported in Reuters, “Americans will head to the polls today to determine whether or not Trump’s Republicans will maintain their grip on the U.S. Congress, or if Democrats can slow the president’s agenda after a divisive campaign marked by clashes over race, immigration, and trade.”

This election will determine who will control the House of Representatives as well as the Senate. Many analysts believe that there is a low probability that the Democratic candidates will have enough votes to gain control of the Senate. However, they are forecasting that the Democrats have a good chance of taking enough seats in Congress to control the House of Representatives.

Jim Wyckoff of Kitco News wrote, “Many believe today’s U.S. vote is a referendum on the performance of President Donald Trump. Big gains by the Democrats would likely be initially bearish for the U.S. stock market and would signal gridlock in Congress the next two years.”

If the Democrats score significant gains, the downside pressure it would exert on the U.S. equities markets, as well as the gridlock in Congress, would definitely have a bullish influence on gold prices. It would create uncertainty, which in and of itself, has historically been the catalyst for gold pricing to move higher.

A bearish U.S. equities markets would undoubtedly influence the Federal Reserve in terms of their pace and goal in taking interest rates to what they believe is normal. Currently, it is highly anticipated that there will be one more interest rate hike this year, which will occur in December immediately following the conclusion of the FOMC meeting.

Currently, gold is trading off by five dollars on the day and is fixed at $1,227.40. Election results will not begin to be tallied until this evening and based upon the results of the election we could see gold dramatically gain or lose value.

If the Democrats effectively gain control of the House of Representatives, we could easily see a $10 or $15 spike higher in gold. If the status quo remains the same, meaning that the Republican Party continues to control both the House and the Senate, then we could see gold trade lower.

Wishing as always, good trading,

Gary S. Wagner - Executive Producer