Gold, an Election Year and Trump: What the Experts Say

It’s only February, but 2020 has already proven to be a wild ride for the resources industry, with commodities most exposed to China taking the biggest battering so far.

Despite the uncertainty and panic over the situation in China, where as of this writing more than 1,300 people had died from the coronavirus (COVID-19) outbreak, it’s still an election year in the US.

Incumbent President Donald Trump looks set to bulldoze any challengers for the Republican nomination, while the Democratic Party is two states deep into its primaries with the race seemingly still wide open for anyone to claim the nomination.

The election has 10 months to go (and started a long time ago), and it’s been baking itself in as background noise for the mining space over that period. As the November 2020 ballot gets closer, it will become clearer whether Trump and his trade war and claimed economic prosperity will continue, or the US will take a different, yet-to-be-determined path.

At the recent Vancouver Resource Investment Conference, the Investing News Network (INN) took the opportunity to ask newsletter writers, mining companies and analysts whether the coming election means anything to them; the questions were varied, but the theme was the same: Does the fact that it is an election year change anything?

If a common theme emerged, it was that the election year doesn’t matter as much as the result.

To start, US-focused mining companies approached by INN for an unscientific, unattributed poll responded unanimously that the lead up to the election doesn’t change anything for them, though one added that “the election might, but that’s a question for 2021.”

Another remarked that there is nothing a resources company can do to control its own fortunes when it comes to an election. “There’s so many other things happening that move the needle a lot more. Truth is, there’s nothing you can do about it,” they said.

Two others dipped into the political, with one predicting that it “will become much more difficult to operate if the Democrats happen to win.” The other said they like Trump so far, and they are operating under a “wait-and-see” approach.

Analysts, newsletter writers and investors expect a greater effect from the election due to its impact on sentiment and where it could send prices for commodities and equities.

John Kaiser of Kaiser Research said that for gold, a result either way is unlikely to change the situation.

“It doesn’t really matter what the outcome is, because much of the uncertainty is linked to the Trump administration’s policy, so if Trump is back in, the uncertainty factor is not going back. Trump’s building the deficit to record levels (and) he’s going to keep doing that … if the Democrats get in, they’re not known for decreasing the deficit,” he said.

Kaiser added that the main thing he is looking out for is infrastructure spending — because that would be good for all the metals besides gold.

“The biggest thing that I’m looking for is to see which party comes out and pounds the table and says, ‘When our term starts, we’re going to engage in infrastructure renewal’ — because that’s a promise that Trump has not kept,” he said.

“That of course would boost the deficit even further because you’re going to have the government doing capital spending to repair bridges, redo the grid and all that … So if that theme starts to emerge, and both parties are capable of pushing that theme … then we could have a perfect storm of gold going higher and the macroeconomy not failing, but also staying alive.”

David Erfle of JuniorMinerJunkie said that for him as an investor, he is thinking about how the reaction to the result will play out in the market.

“(With) the stock market continuing to make all-time highs … I’m expecting a correction. Depending on how that plays out, if it’s going to be a panic-type correction, then gold stocks will get caught up into that. But if it’s going to be just a natural, slower-progressing correction, the gold stocks would benefit from that. We’d see safe haven capital coming into the market again.”

Looking back on Trump’s time in office, Erfle added, “I do think (Trump’s) been good for mining in the US, particularly places like Idaho, which was off the map as far gold miners are concerned because it’s been difficult to get permits there.”

Brian Leni of Junior Stock Review said that for him as an investor, the election year changes nothing for the way he operates, though he added that “these events will certainly affect us.” For him, the election is more interesting in a social context than an economic one. “(As an investor) I stay with what I’m doing and I trudge ahead — the rest is noise.”

Some of the answers strayed into the political, with Benj Gallander of Contra the Heard Investment Letter calling Trump a “constant wildcard” that makes his job investing more difficult due to uncertainty. He added that he feels a Democratic victory wouldn’t be as bad for the sector as many are making out.

“If the Democrats get in, a lot of people might not like that … they might not think it’s as good for businesses — but they already forget that under Barack Obama, the economy was doing amazingly well,” he said. “I don’t think what (Trump has) done is particularly smart in any way, shape or form.” Gallander added that he doubts Trump will be the next US president.

Brent Cook of Exploration Insights also drew on the politics of Trump in his answer on how the election may play into 2020, saying that for gold and the sector, “uncertainty around the world (is) going to raise the gold price, so it’s going to be positive. Not necessarily positive for the world, but this tiny little sector. … I expect we’re going to see the major markets roll over regardless of who gets elected.”

Cook added that even if a Trump presidency and uncertainty is good for the space, he doesn’t think it would be a good thing to have Trump in again. “It’s just chaos, it’s going to get worse with a man who has no insight into how the world works, unless it’s a real estate deal.”

Byron King of Agora Financial offered his thoughts on how Trump could possibly lose.

“Trump would obviously like to be reelected. How do you not get elected? Well, you start a war. I don’t think he’s going to start any wars. (Or) you have a big economic crash. I don’t see that happening … people have jobs (and) there’s bread on the table. The one person who can defeat Donald Trump in this election is Donald Trump.”

Brien Lundin at Gold Newsletter, unsurprisingly, talked gold. He that he doesn’t believe that the US election will have an impact on the precious metal, “unless it looks like the Democratic side of the ticket starts to gain ground, especially if more of a lefter candidate like Bernie Sanders wins the nominations.

“I think that would be good for gold … but I don’t really see that happening.”

Rick Rule of Sprott (TSX:SII,OTC Pink:SPOXF) also narrowed in on gold, offering his thoughts on where Democrats and Republicans see the most uncertainty and how they may interact with gold.

“Democrats are afraid of Trump … when people are afraid they buy gold,” said Rule. “Republicans are terrified of Warren and Sanders. My suspicion is that a Warren or a Sanders presidency would see a 35 percent decline in US equities markets and we could have a rally in gold like we had when Obama first came into power and like when Clinton first came into power.”

However, he added that those rallies “would be short-lived in the absence of concern over ongoing purchasing power of the US dollar.”

The impact of Trump on the gold price and the wider resources industry is something that is (and will remain) up for debate. Uncertainty tends to drive prices for the metal higher, as do geopolitical saber rattling, trade wars, the US dollar’s potential woes thanks to the banking sector and all the rest.

For prices, gold has remained well up since Trump took over: The year he was elected, gold was at US$1,150 per ounce, and it’s currently well above US$1,500. The man himself has also gotten the thumbs up from gold-focused companies in the US for his permitting push.

Time will tell what sort of impact the election will have on the sector; while many analysts waved away the notion that it will have an impact on gold, it’s highly likely all of them will be following the election and factoring its ups and downs into their own sentiment and approach to investing.

Don’t forget to follow us @INN_Resource for real-time updates!

Securities Disclosure: I, Scott Tibballs, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.