Lady Liberty has been on the edge of her seat watching what many experts are calling “the most important election in history.”
Whichever side of the aisle you’re on, the good news about gold is that it is sovereign. Gold gives its allegiance to no one. Gold is fixed like the sun, and the currencies of the world revolve around it, not the other way around. However, gold pricing is known to be highly manipulated in the paper markets, mainly in ETFs like GLD. Many times, when the stock market goes up, GLD rises with it, and when the markets sell off, the price of gold sells off too.
Gold is the exact opposite of the dollar and is a competing currency. We know that presidents come and go. It’s the Federal Reserve and their policies that are the main drivers of dollar strength/weakness and market fluctuation.
Trump is the ninth president we have had since the dollar was taken off the Gold Standard in 1971. At that time, the price of gold was just $35 an ounce while the National Debt was $398 billion. In the year 2000 gold was $300 per ounce and the National Debt was $5.6 Trillion. At the start of the 2008 Financial Crisis, gold was $900 an ounce with a National Debt of 10 trillion. Today, gold is around $1950 per ounce and the National Debt is over $27 trillion. As the national debt rises, gold rises to a similar degree. Many experts agree that the spot price of gold should be much higher if it were a true representation of our nation’s debt obligation.
During the post-election chaos, the US dollar tanked and the Dow Jones saw a more than 500-point gain as gold jumped $51.
There is an old joke that talks about the main problem with politics (Poly-Tics). The word actually comes from the Greek; ‘Poly’ meaning ‘Many’ and ‘Tics’ are “veracious blood suckers.”
It does seem that most people who get into government seem to only fulfill their own agenda for personal gain. Many seek to use the power and influence that come with these positions to line their own pockets rather than do what is right for our country. Trump believes that massive voter fraud has taken place and has since launched several lawsuits in key swing states to challenge the outcome of the election.
Joe Biden mentioned during the debates that we are headed for a “Dark Winter” and is pushing for new COVID-19 protection measures that include mandatory face masks and contact tracing. Biden also is planning an historic banker bailout to quell more than 80% of all commercial mortgages that are in forbearance from the pandemic.
Many experts agree that with Biden as our president, the dollar will be greatly weakened and the price of gold will rise significantly. Silver, platinum and palladium are used in industry and tend to be much more volatile. Their prices could pull back if the industries slow down or even crash – or if some industries cease to exist, due to regulation or other means.
Precious metals investing is more about ‘preservation’ rather than speculation. The most successful investors we work with keep a set allocation around 10% of their investable net worth to gold. This strategy has helped their overall portfolios outpace other’s portfolios that do not include gold.
Either way you go this contested election, all markets may be more volatile than usual.
Nathan Lewis is a Senior Metals Specialist at the United States Gold Bureau reporting on current precious metals markets. The details of this post are his opinion.