Gold Price and the 2022 Elections

With less than 3 weeks to go in the current election cycle (where has the time gone?), it seems time to discuss politics again, if ever so briefly.  Not so much for politics sake, but as a means to suss out what may be up ahead for the economy, inflation, and the impacts on precious metals connoisseurs and investors.  It’s been a couple years since we delved into a political discussion, but the economic consequences of elections implore us to take another look.  While we thought the choice in the last election was between higher taxes or higher inflation, the results have been both higher taxes and higher inflation.  As early voting begins this week in many places, the stakes could not be higher, or the conditions more polarizing, than they seem today.  

Even though it might be impossible to write about politics in a  completely unbiased way, I will do my best to at least identify and acknowledge that bias when it seeps through, to help you know when to apply an extra grain of salt to the analysis.  My opinions are not necessarily those of anyone or any company (including the US Gold Bureau), other than my own.  That said, there appear to be some undeniable trends developing in the political landscape, that point to a tumultuous Election Day and  periods following.  Recent polling suggests that the concerns of voters are not aligned with the perceived concerns of political parties today.  That is, the hot buttons for people voting in a few weeks are not what the politicians thought they would be.  This means that political maneuvering and messaging campaigns are not motivating potential voters to support their cause.

Anecdotally and unscientifically, there seems to be more Democrats upset about the current administration and economic conditions, than Republicans happy about them.  This may indicate that Democratic voters are more likely to vote for a Republican, than vice versa - at least in this election cycle.  When voters are upset about current conditions, they generally blame the party in power.  While my personal views are sometimes too religiously conservative (pro life) to be openly embraced by either political party, Republicans currently allow people like myself to exist within the framework of what they say they believe.  Meanwhile, Democratic politicians from states like New York make open announcements that people with conservative religious views (pro-life) are not welcome to reside in their state, let alone in their political party.  Both the current and previous Governor of New York have made similar statements.  But many Democrats consider such statements provocative and inappropriate, and have begun to rebel.

Case in point, former Democratic Presidential Candidate Tulsi Gabbard recently made a public departure from the Democratic Party, and has been campaigning to help Republicans win back both houses of Congress.  She cites several concerns, chief among them the attitude of Democratic Party bosses to people of faith here in America.  The reason I bring this up, is that defections currently appear to be one-sided.  Many Republicans are not happy with current Republican Party leadership, nor with the direction of the party itself.  But the current level of Republican discontent has not led to any publicly announced defections to assist the Democratic side.  Regardless as to whether we are happy or sad about this development, it appears to be an additional sign that the momentum in the 2022 Mid-term Elections is in favor of the Republicans making headway in Congress, Governorships, and in some local elections that have traditionally favored Democrats.

With inflation at 40-year highs, mortgages more difficult to obtain,  rents rising, and retirement account balances cratering, life has become difficult for people of all political persuasions living in America today.  While discussing what to focus on during a political campaign, former President Bill Clinton famously used the theme, “It’s the economy, stupid.”  That statement has been used by political pundits in nearly every election cycle since first used in the 1992 election.  What makes this year particularly interesting is that the House, Senate, and Presidency have been under Democratic control and leadership since the 2020 election.  This makes it difficult to blame Republicans for economic malaise and policy decisions, if they are not in positions of responsibility.  In September of 2020, US inflation was at 1.4%.  In September of 2021, US inflation was at 5.4%.  In September this year (last month) it was 8.2%.  

If we look at other common metrics voters consider, such as stock prices, gas prices, crime levels, homelessness, immigration challenges, and the state of world peace/unrest compared to 2020, many Americans would say things have gotten more challenging over the last couple of years.  Whether sitting politicians are to blame or not is somewhat irrelevant.  It is human nature to want to blame someone for our difficulties, and sitting politicians often win that prize.  If we assume that Republicans are able to ride the wave of discontent to win back the House and Senate, what does this mean for average Americans?  It likely means a stalling of the Biden Administration agenda, and perhaps a rollback of hiring plans at the IRS to install 87,000 new agents to seek additional tax revenue from ordinary Americans.

It also might mean a slowing or reversal of shipping American LNG and diesel fuel to Europe, which would lower utility costs and shipping costs for average Americans - which in turn would lower inflation in the US.  There could also be a greater hesitancy to deepen and lengthen the Russian-Ukraine conflict by sending American arms and resources to Ukraine, and a renewed interest in working out a negotiated settlement promoting peace in the region.  This would positively impact future food and energy prices worldwide, including here in the United States.  The resulting peace dividend would also help the stock market rediscover previous levels, and allow the Strategic Petroleum Reserve to be resupplied with lower oil costs.  

For gold investors, the best news could be legislation recently introduced by Republican Congressman Alex Mooney from West Virginia (H.R. 9157), would be considered and receive a fair hearing.  Currently, Republican proposals generally aren’t considered.  The proposal would restore precious metals backing to US currency, which would help balance out of control budgets in Washington, and help tame inflation for ordinary citizens nationwide.  Until that happens, we can accomplish something similar by purchasing gold (and silver) to store a portion of our savings in ourselves, no matter what changes this election brings.