What Will Happen to Gold Prices after Joe Biden’s Win?

The U.S. presidential elections definitely plays a big role in shaping the future of the world’s largest economy and the global economy in general. It is a major theme for financial and the metal markets across the globe. Undoubtedly, the world is likely to see increased volatility in stock markets and watch investors in search of traditional safe havens such as gold. A fluctuation is predicted to be witnessed in the gold prices ahead of Joe Biden’s win.

History Suggests Potential Upside

Barack Obama was the last Democrat in charge of the White House and with Biden’s win, the country he will lead will be distinctly different than the one Biden saw as the Vice President of Obama. In January 2009, when Obama took office, the price of gold was valued at US$890 and by the end of his first term, the price of the metal had climbed to around US$1,685, which is a rise of 88.6%. However, Obama’s second term proved more volatile. The price of gold slipped from the US$1,685 level in 2013 to around US$1,195 in 2017, a 28.9% decrease.

Before the outbreak of coronavirus, the Dow Jones Industrial Average had been on a steady upward curve since February 2009, and in February 2020, the index of about 30 large US-listed companies reached 29,398, which is an all-time high. However, markets plummeted globally after the COVID-19 outbreak just over a month later and the Dow hit 18,588, its lowest point since November 2016.

At the same time, the gold prices have been incrementally increasing since Trump’s government. The prices for gold have risen from US$1,183 per ounce in November 2016 to around US$1,900 in October 2020.

Looking at the price fluctuations over the last decade, a Biden administration may be even better for gold and for all commodities. But it may vary on certain situations, disasters, or circumstances the world might face in the coming four years.

Is Gold Price Rise Guaranteed Under Democrats?

Not all watchers of the mining sector are optimistic about the increase in gold prices. Some believe that Biden will simply have other issues to tackle and some are being more motivational for the gold price. It is believed by many that gold price is going to be more impactful when and if a COVID-19 vaccine becomes widely available. This will give a kicking start to the US economy and will bring it back into gear.

Although a Democrat, Biden has won the Presidential election they will have to wait till January 2021 for the two Senate runoff races in Georgia in order to get a clearer picture whether they’ll re-take control of the upper chamber. Until then, a Republican Senate and a Democratic president and House will be ideal for gold to rally. This is mainly because if neither party controls the Congress, both higher taxes and trade wars will be largely out of the discussion. In addition, a divided Congress has also let down expectations for a huge US fiscal stimulus package. With a good-sized stimulus to aid the COVID-19-hit economy, bond yields have fallen sharply lower in expectancy of less borrowing and more quantitative easing from the US Federal Reserve. The plummet in the long-standing US Treasury Bond yields is making the dollar a less-attractive investment, which is ultimately driving the demand for gold.

The Bottom Line

Joe Biden’s win could lead to concerns over larger government budget deficits and higher taxes. The large fiscal deficits can boost the appeal of gold a haven investment. Besides, the international trade tensions, high global geopolitical risk, and the reduction in interest rates worldwide have investors looking to wind break their portfolios just in case there is price volatility in the stock market. Investors are using gold as one of the assets to appropriately reduce risk. The U.S. bond yields trade substantially lower year to date, which is decreasing the relative opportunity cost of gold holdings, and also making the metal a more attractive investment.

About the Author(s)

Princy A. J

Princy holds a bachelor’s degree in Civil Engineering from the prestigious Tamil Nadu Dr. M.G.R. University at Chennai, India. After a successful academic record, she pursued her passion for writing. A thorough professional and enthusiastic writer, she enjoys writing on various categories and advancements in the global industries. She plays an instrumental role in writing about current updates, news, blogs, and trends.