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Precious Metals and the 2020 Presidential Election Results

Jeffrey Christian
November 10, 2020
Video Transcript

Jeffrey Christian: Hello, it’s Jeffrey Christian. It’s November 10th. Coming to you from Monex Precious Metals. We’re a week after the election in the United States, perhaps one of the most important elections of our lifetime, and I want to talk a little bit about the political environment and its effect on gold and silver. There are three big issues that we have been talking about that are bullish for gold and silver in the world. One is the pandemic, which is new this year, and the global recession that has followed the government efforts to control the pandemic, and the third one is a more political set of problems that are really global. We’ve had our issues in the United States. We continue to have them. There’s a rise of nationalism and nativism, not only in the United States, but around the world, a breakdown in international cooperation.

Those three sets of factors remain in place and nothing that happened in the election are going to solve them or solve them soon. So, from our perspective, the big drivers for investment demand into gold and silver and consequently higher gold and silver prices remain in place. In addition to the Presidential election, the Senate and the House control clearly are not resolved yet. Our expectation is that the Senate will probably remain in Republican control and the House in Democratic control, but there are four seats still up for determination in the Senate and more than that in the House. Any Republican control of the Senate, which seems likely, or the House, which seems less likely, could impede Democratic administrations plans for infrastructure and reconstruction spending. Similarly, a Democratic Congress may not be all that great for President-Elect Biden. If you look back at the Obama years, the first two years of Obama’s Administration, he found more opposition from Democrats in the Congress than he did from Republicans. So, we don’t necessarily see the election as having solved any of those big issues. Going forward, there are implications for the world economy, and the world political, and social systems, and consequently for gold and silver.

Fiscal policy probably will be more stimulative, which will worry markets about inflation. CPM Group doesn’t necessarily see inflation as a problem. We’re much more worried about the deflationary consequences of the excess labor, excess commercial real estate, excess manufacturing compacity, not only in the United States, but on a global basis. Global trade and relations between the United States and China and the United States and the rest of the world, that’s all up for grabs. Things should get better, but it’s not going to be like it was prior to 2017. United States has lost a lot of governmental prestige globally and it’s going to be hard to restore that, if it can be restored at all. Damage has been done to our reputation and our influence in the world. Regulations are problematic. We’re looking at some of the people that the Biden Administration is looking at or Biden Transition Team is looking at and we’re a little bit concerned, because they’ve been involved in some pretty bad financial market regulatory decisions in the past and that could be problematic for the securities issues and the bonds markets going forward, again stimulative of gold and silver.

Finally, climate change, things are likely to be more stimulative in the economy as a Biden Presidency might be more willing to look into some of the things that can be done to remediate climate change. Overall, monetary policy will remain accommodative, it has too. It doesn’t necessarily mean the dollar will fall. The dollar will probably, in our view, move sideways in a volatile fashion, giving a lot of people time to worry about the dollar, but also giving people a lot of dollar buying power. You put all that together and it looks like it’s supportive for gold and silver investment demand and consequently prices. It’s a continuation of the long-term trends that we outlined in 2000 that have been going on ever since then with some cyclicality. That’s all I have to say right now about the impact of the elections on gold and silver. We’ll talk to you next month. Take care, take care of yourself, and be kind to others.

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