Regardless of their political leanings, serious buyers of gold and investors in all precious metals understand these are very unusual times. This reality is driving a great deal of discussion, particularly in a post-Brexit world.
Unpredictable World Politics
Many respected analysts and pundits were proved wrong about the possibility of a successful leave vote coming out of the Brexit referendum. As a result, they are now particularly focused on trying to access the ultimate victor in the U.S. elections and what such an outcome will mean to financial markets generally, and gold specifically.
Of course, from the perspective of a long-term investor in gold, it is difficult, yet essential, to separate one’s political view from market factors that will determine gold prices. Regardless of those personal views, it is important to understand how the financial world will view the different outcomes and plan accordingly.
A Trump Presidency?
Considering the possible election of Donald Trump in November, there is a decidedly alarmist tint to many predictions. For example, a leading analyst at Dutch bank ABN AMRO sees gold hitting $1,850 or more under a presidency of The Donald. While she discounts that probability, Georgette Boehle of Amro opines, “…his rhetoric and possible policy actions could create domestic and international uncertainty at best, and upheaval at worst.”
However, even this pessimistic view of a Republican victory is not offset by a more positive opinion about a Clinton victory. Boehle sees a positive turn for gold regardless, noting the probability of greater inflation, a worsening currency situation, and inevitable negative interest rates.
Overall, the banks latest analysis sees gold moving to at least $1,650 in the next few years.
The CEO of DoubleLine Capital, Jeffrey Gundlach, shares the view that Trump would cause “things [in the financial sector] to get pretty scary.” Gundlach goes on to state that he actually believes Trump will triumph over Clinton because, “…they’re looking for change, and I think Trump is going to win on the basis of that.” 1
Possible Outcomes for Precious Metals
Analysts look at a number of investments they consider would benefit from a Trump presidency, with gold and precious metals mining stocks included in the list. According to analysts at TheStreet.com, “investors may begin flocking to gold and related entities — some have already indicated that’s the case.” 2
If you would be happy to see gold at $1,850 an ounce in the near-term, then you would be rooting for Trump to win, according to William Watts at MarketWatch. 3 He believes some of the actions he promises to take would ultimately hurt trade and weaken prospects for positive growth in the U.S. economy. Watts refers back to the data in the AMRO study and shows how gold has fared under different presidencies back to the Ford era.
Regardless of the outcome, the ongoing world economic struggles underlie the expectations for gold to do well in the coming months. Apparently the market sees the election as ultimately offering now real short-term solutions to those staggering and growing global financial challenges.