07/28/2024
How will the upcoming presidential election impact the gold market?
President Joe Biden has dropped out of the presidential race. It appears Kamala Harris has the inside track to the Democratic Party nomination, but that isn’t a foregone conclusion. Polling currently shows Trump and the Republicans holding an edge, but we are a long way from November. A lot can change, as the events of the last few weeks remind us.
There’s no way to know exactly how the election will impact gold, but we can identify some historical trends that can help investors as we wade into this sea of uncertainty.
According to a World Gold Council report titled Ballots to Bullion: Examining the U.S. Election’s Effect on Gold, generally, presidential elections haven’t historically had a significant or immediate impact on the gold market. But there are some subtle identifiable trends.
Overall, gold tends to slightly underperform around presidential elections. However, there are some nuances detectable in the data.
Gold has historically performed slightly better in the six months prior to a Republican victory and then traded flat in the immediate aftermath. Conversely, gold tends to underperform in the six months before a Democratic win and trade just below the long-term average within the first six post-election months.
The WGC emphasizes that neither of these trends is statistically significant.
Looking at gold’s performance after the last two elections, we find that during the six months following the Trump inauguration, gold was down 2.6 percent. During the first six months of the Biden presidency, gold fell 6.4 percent.
More generally, the WGC found that gold bar and coin demand seems to increase, on average, during Democratic presidencies, this is not the case with other segments of investment demand.
