How will the US presidential election affect gold prices?

This week, there are two major events that could have a strong impact on the price movements of precious metals such as gold and silver, including the US presidential election and the Fed meeting...

This week, there are two major events that can strongly affect the price movements of precious metals such as gold and silver, including the US presidential election on Tuesday (November 5) and the monetary policy meeting of the US Federal Reserve (Fed) ending on Wednesday (November 6).

Gold prices started the new trading week early this morning (November 4) in the Asian market with a slight upward trend. At 7:00 a.m. Vietnam time, the spot gold price increased by 1.2 USD/oz compared to the close of Friday's session in New York, equivalent to an increase of 0.04%, trading at 2,737.7 USD/oz - according to data from the Kitco exchange.

Converted according to the USD selling rate at Vietcombank, this price is equivalent to approximately 84 million VND/tael.

THE FRAGILE BALANCE OF GOLD PRICES

Analysts believe that before the US election results come out, the gold price will continue to fluctuate due to the uncertain psychology of investors: on the one hand, they want to take profits at the still high price range, on the other hand, they are worried that the gold price may increase higher after the election - the fear of missing out (FOMO) mentality has contributed to "fueling" the recent gold price fever. However, the US election results could lead to a major turning point for the gold price.

Speaking to MarketWatch, Adam Koos, president of Libertas Wealth Management Group, said Thursday’s sharp drop in gold prices was “a reminder of the delicate balance that gold is trying to maintain.”

“U.S. Treasury yields are still rising, putting downward pressure on gold, especially when riskier assets like stocks are selling off,” Koos said. The expert said gold prices are facing “typical push-pull” factors as investors need liquidity when facing losses in their stock portfolios, leading to even gold “not being safe enough when the market’s risk appetite is declining.”

GoldSeek.com president Peter Spina emphasized that gold prices have been rising steadily and persistently for many months. He said it is difficult to determine whether last week’s decline in gold prices will quickly reverse in the next few days, or lead to a deeper correction that lasts several weeks.

According to Mr. Spina, the US election is likely to cause fluctuations in gold prices this week, but so far, the effect of this event on gold prices is positive because the uncertainty has increased the demand for holding gold as a hedge against risks. No candidate has proposed a solution to handle the trillion-dollar budget deficit of the federal government, and this will lead to increasing interest on US public debt and a larger deficit.

With the increase in debt, gold will play a good role as a safe haven. Mr. Spina predicts that whether Mr. Donald Trump or Ms. Kamala Harris wins, gold prices will find opportunities to increase after the US election.

Analyzing further, Mr. Koos believes that the US election can create a major turning point for gold prices, but the direction of gold prices in the case of one candidate winning will not be exactly the same as the case of the other candidate winning.

VOLATILITY WILL INCREASE

If Mr. Trump wins, “markets may appreciate deregulation and business-friendly policies. This could initially boost the dollar and put downward pressure on gold,” Mr. Koos stressed. However, “if those policies increase inflation concerns and heighten international trade tensions, gold prices could find support as investors seek protection from risk.”

In the event that Ms. Harris wins, the result could “stir up expectations of increased government spending, which could put greater downward pressure on the dollar and send gold prices higher.”

Given the differences in trade policy, spending and regulation, each candidate could easily sway investor sentiment and impact the appeal of gold as a safe haven. “In short, this election could be a major catalyst for gold’s next move,” Koos said.

Another issue related to gold prices that many experts have been talking about recently is that gold prices have been hitting new highs despite the continuous rise in US Treasury yields and the US dollar. This goes against the usual pattern, as rising US Treasury yields and the US dollar are usually factors that cause gold prices to fall.

But this past week, that pattern held true again, at least in the two sessions on Thursday and Friday, when gold prices slid due to the above factors. Koos said that these developments reflect that investors are attracted to rising yields.

Looking back at history, Mr. Koos said that the law breaking between yields, exchange rates and gold prices has appeared many times before, especially in periods of increased geopolitical instability or macroeconomic shifts. In such a context, US Treasury bond yields, USD exchange rates and gold prices can all increase, as happened last October or during the oil crisis in the 1970s.

“The current geopolitical shift and the trend of de-dollarization may lead to a period of lawlessness, but certainly that lawlessness is only temporary,” the expert emphasized. Therefore, if we rely on history to predict, the recent increase in yields, exchange rates and gold prices will lead to increased volatility in the coming time, he said.