Article by Myra P. Saefong in Market Watch
The U.S. presidential election has been more of a distraction than a direct influence on the gold market, but expect the precious metal to be a winner no matter the outcome.
For gold, the election isn’t a “blue versus red” competition between the Democrats and Republicans, says Frank Holmes, chief executive officer of U.S. Global Investors. It is a “push the gold button” event, he says.
Investors should consider buying real assets and gold given the Federal Reserve balance sheet expansion and understated inflation, he says. These are among the reasons why Holmes believes gold will climb to $4,000 by 2023.
Futures prices for gold have already climbed by 57% since the day Republican President Donald Trump took office on Jan. 20, 2017. On Nov. 2, prices settled at $1,892.50. They are up around 24% year to date, after touching a record high of $2,069.40 in August.
There are many reasons for gold’s strong performance over the past four years, and while the U.S. is an important component of that gold story, it’s not the only factor, says Juan Carlos Artigas, head of research at the World Gold Council. “Gold is a global market,” he says.
The reduction in interest rates worldwide, high global geopolitical risk, and international trade tensions have investors looking to hedge their portfolios in case there is price volatility in the stock market, and gold is one of the assets investors have used to “appropriately reduce risk,” he says.
The combination of high risk and the low opportunity cost of holding gold have been important factors overall, he says. U.S. bond yields trade significantly lower year to date, reducing the relative opportunity cost of holding gold, and making the metal a more attractive investment.
These factors are not going to change anytime soon and interest rates, in particular, are also not likely to increase anytime soon, says Artigas. That’s “regardless of who…wins the White House and because loose monetary policy is seen as important to ensure a…proper rebound of the economy.”
Any election outcome will “likely support gold investment demand, albeit …
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