Heres how the US elections will influence gold
Once the US presidential elections have come to an end, the experts of precious metals have analyzed how the new political situation will influence the economic one.
The performance of gold prices has been studied in-depth, and four factors will be determinant for the future of this asset. But, which? Read on!
The US elections are over, and markets will take time to reflect the full impact of Trump's victory. Gold immediately rose above $1,300 per ounce after the news of Trump’s win; however, it has recently settled back to $1,230. Why? Well, the future of the US economy is quite uncertain today.
According to Sean Williams, contributor in The Motley Fool, there are four factors from which physical gold could benefit and that could push gold to a level of $2,000 per ounce as a result of Trump's presidency.
1- Economic uncertainty
Precisely because the future of the US economy is uncertain, the investors' confidence in currency is not fostered, which could automatically drive investors to gold.
2- National debts
Trump's tax proposals could lead to an expansion of the annual federal deficit, which at the same time would increase the national debts faster than in previous years. These debts would push gold prices even higher, becoming a primary focus for investors.
3- Physical gold to offset mining costs
One of the most common metals used in construction is copper, which is mined in conjunction with gold. Mining companies use gold to offset the costs of copper mining; this in addition to Trump's infrastructure spending plan will increase the demand and production of both metals.
4- A wink at the history
This factor is somehow psychological but, according to CNBC, gold tends to outperform when Republicans take the presidency. So, investors would probably opt for physical gold and gold stocks before Trump fills the position given this historical fact.
More expert opinions support these factors; and taking into account that gold prices has advanced more than 20% so far this year, it is no surprise that gold is conquering even the domestic sphere:
“We believe that investors will continue to be driven to gold as a safe haven given the further loss of confidence in central banks on a global scale and perhaps domestically, because of the uncertainty following Trump’s presidential victory”
Joe Foster, Portfolio Manager and Strategist in VanEck