Trump’s presidency has been very good for the gold price. Would a second term be as beneficial for the yellow metal?
US President Donald Trump’s years in office have indirectly been good for the gold price. A seemingly never-ending trade dispute with China and his tongue-in-cheek approach to diplomacy and governance have created the perfect environment for safe haven assets.
Since Trump took office on January 20, 2017, the value of the yellow metal has climbed from US$1,210 per ounce to an all-time high of US$2,063 in early August of this year.
Of course, Trump alone isn’t responsible for gold’s price rally over the last four years or so. While gold had a firm hold on the US$1,500 range before the COVID-19 outbreak, it was the coronavirus and global responses to the disease that really propelled it to new heights this year.
With the US election approaching, many investors are asking themselves what will happen to gold if Trump is re-elected. Read on to learn what mining experts think, and click here for coverage of what could happen in the event of a Joe Biden victory.
Trump and gold: More price upside in term two?
“The issue of the year is COVID-19 and all of the government spending that’s just gone out to try to cover the bills,” Byron King of Agora Financial told the Investing News Network.
The Whiskey and Gunpowder newsletter writer went on to note that the true issue isn’t partisan.
“Washington, DC, has truly planted the seeds of inflation in the economy,” he said. “We have fewer people employed, fewer people working, the economy has definitely slowed down. And then you’ve got literally trillions more dollars chasing the same amount of things. So you’re already starting to see inflation in a variety of different ways.”
Inflation by its nature devalues the US dollar, which ultimately benefits gold through the increased uncertainty it introduces.
“I think there’s still quite a bit more upside left in gold,” said King. “It’s really just a question of events and the rate at which it will climb.”
Gold’s rally is expected to benefit the broader resource sector as well, according to King. “It’s a monetary issue of very deep, deep impact,” he said. “I’m anticipating more with gold and by extension the gold miners, the gold royalty companies — it’s everything from the Canadian juniors up to the big, big majors.”
The 2020 election is one of the most polarized in recent history, and if either side refuses to concede that will add to the troubles facing the dollar. “Political uncertainty is not good for the dollar,” said King. He went on to explain that the price of gold is an inverse reflection of the value of the dollar.
Interestingly, over the almost four years of his presidency, Trump has strongly advocated for a weaker dollar, arguing that an overly strong dollar puts the economy and US businesses at a disadvantage. However, in May of this year, the US head of state changed his familiar refrain, stating that “Now is a good time for a strong dollar.”
Regardless of the recent departure from his old rhetoric, Lobo Tiggre of Independent Speculator thinks Trump will go back to saying a weaker dollar is better for the economy.
“He has been arguing for a weaker dollar since before he became president, and he got it for awhile. And that certainly helps the gold price,” said Tiggre. “And hopefully that would mean another Trump administration would be just as good for gold.”
The amount of stimulus spending and the inflationary tone it sets is also a chief concern for Tiggre, who believes either candidate will inherit a challenged economy in need of immediate resuscitation — which again is ultimately positive for gold.
“Actually I think either administration would be good for gold,” said the CEO of Louis James.
“It’s not a question of if we’re going to have a fiscally conservative versus a profligate government going forward, it’s just a question of how profligate is the government going to be,” he continued.
With as many as 30 million Americans unemployed and new jobless rates sitting at just under 1 million a week, just how much spending will come in the months ahead remains the question.
Trump and gold: Market disruption the ultimate catalyst
For Danielle DiMartino Booth, a critic of the US Federal Reserve and chief strategist at Quill Intelligence, Trump’s presidency has been one of unique precedence.
“Trump has effectively signed in the closest thing that we’ve ever had, as a Republican, to modern monetary theory, to socialism in America, which is kind of strange to see under Republicans,” she said.
That has been beneficial for the safe haven nature of gold.
“There’s kind of this myth that gold and inflation go hand-in-hand, (but) that’s not true,” said DiMartino Booth. “Gold and disruption go hand-in-hand.” She continued, “I don’t know that there’s necessarily any inflationary type of implication for gold because, of course, right now we have deflationary impulses that are pulling down prices; and yet we’ve seen gold be as resilient as it is.”
That resiliency was on display in March, when the yellow metal fell to a year-to-date low of US$1,464.91. The massive plunge was a response to COVID-19 closures globally. In the months that followed, safe haven demand, a weakening dollar and geopolitical tensions all drove gold up.
The tenuous landscaped allowed the metal to regain as much as 40 percent.
Gold steadily trended higher until early August, when after breaking the US$2,000 threshold the metal faced headwinds that pushed it back below US$1,950.
For Mercenary Geologist Mickey Fulp, there is downside in gold that should be watched. “At US$2,070, that was unsustainable — that runup was unsustainable,” said Fulp.
“(Gold has) a base at US$1,800. If it goes below US$1,900 for any length of time, (it) is probably going to US$1,800, because you look at a chart, and there’s no resistance below its current level all the way down to US$1,800,” he said. “And (it has) a really, really strong base at US$1,720, plus or minus. So it has a lot of downside risk right now.”
Trump and gold: The mining sector perspective
As global economies ready for a potential second round of COVID-19 cases and closures, economic recovery in the US will require a concerted effort across all sectors, the resource space included.
For Fulp, Trump has already evidenced his pro-resource sector stance. Meanwhile, he thinks Democratic candidate Joe Biden’s role in the Obama administration speaks volumes about his position.
“There were no permits granted for anything for eight years during the Obama administration,” he said. “That’s the issue with mining, Trump versus Biden. Trump’s fast tracking all this stuff right now, all these permits are being fast tracked.”
Citing fracking, manufacturing and agriculture, Fulp said all the gains made under the Trump administration will be lost if he isn’t re-elected.
“For me, the real risk is mining in the US,” said Fulp. “A Biden administration (would) be disastrous for mining in the Western US.”
Americans will head to the polls on the first Tuesday in November to select a leader who will need to rebuild the economy and address the US$23.3 trillion and growing national debt.
To learn more about what’s at stake in the mining sector beyond gold, click here.
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Securities Disclosure: I, Georgia Williams, 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.