The 2024 U.S. presidential election, featuring Donald Trump and Kamala Harris, is poised to have potential implications for the gold market. Historically, elections impact financial markets, with gold often seen as a safe-haven asset during periods of political and economic uncertainty.
In 2016, following Trump’s first win, gold prices initially dipped but later surged, rising by 14% in 2017 and continuing to increase by 19% in 2019 and 25% in 2020. The trend indicates that while political events influence gold, other factors such as economic policies, inflation, and global market conditions also play crucial roles.
Trump
During his first term, Trump’s America-first trade policies created international tensions, which sometimes increased demand for safe-haven assets like gold. A second term for Trump could bring a similar focus on bringing manufacturing back to American soil. Protectionist policies and deregulation without drops in government spending might lead to inflationary pressures, which typically drive gold prices higher. Trump’s approach to the Federal Reserve could further contribute to economic uncertainty or potentially make economic policy more certain, with a potential impact on the price of gold as investors seek safety.
At the same time, there is no guarantee that a Trump presidency would automatically boost gold prices. Markets do not always react as expected to political outcomes, and gold’s performance is influenced by several factors. Trump’s pro-business policies could strengthen the dollar, which might counterbalance other inflationary forces and keep gold prices stable.
Harris
If Kamala Harris wins and continues the economic policies of the Biden administration, the impacts on gold could be even more stark. Policies centered on enormous levels of government spending and higher taxes could increase fiscal deficits, raising concerns about inflation. In such a scenario, gold could again be attractive to investors as a hedge against inflation. Furthermore, Harris might adopt a more progressive regulatory approach, potentially introducing market uncertainty that could boost demand for safe-haven investments like gold.
Other Factors
While the election itself is a significant factor, gold prices will be primarily influenced by the Federal Reserve’s policies on inflation and interest rates, demand for gold as an input into manufactured products, government spending, and geopolitical uncertainty. If inflation remains high, gold’s value as a traditional inflation hedge will keep it in demand. Conversely, if the Fed raises interest rates aggressively, it could strengthen the U.S. dollar, making gold less appealing to investors.
As mentioned, geopolitical uncertainty, which tends to bolster gold prices, will also play a role. Ongoing global economic tensions, trade disputes, and regional conflicts may keep pushing investors toward gold regardless of who wins the U.S. presidency. The outcome of the election is just one of many components that will influence gold prices, with broader economic and geopolitical factors being equally important.
Summing Up
On the whole, while the 2024 election is expected to affect gold prices to some degree, the overall trajectory will be determined by a mix of economic policies, inflation expectations, Federal Reserve actions, and global uncertainties. Investors should keep a close eye on these factors alongside the election results to understand the potential movements in the gold market.
