Regardless of who wins the US elections, gold will be the biggest winner
There is no lack of forecasts or guesses about the recently held US elections. What’s more, the accounting for hundreds of thousands, perhaps millions, of mailed votes has yet to be closed. Although, of course, everyone has an opinion: some like red (Trump), some like blue (Biden), and some like none.
The volatility of the past week in stocks, bonds, currencies and commodities is a clear sign that the markets are restless. They hate uncertainty. According to Peter Krauth, an investment adviser, if the outcome of the election is unclear, then volatility will linger for a while and will probably even intensify.
Much of the forecasts are about what will happen to gold. No matter who wins the election, gold will be the biggest winner, says Krauth.
Meanwhile, there are likely to be a lot of discussions. The Canadian adviser suggests to ignore most of it and focus on the rising gold prices.
The gold has already risen 25% so far this year. But that does not mean that it has exhausted its powers.
Bloomberg recently reported that central banks became sellers of gold for the first time since 2010 as some producing nations exploited near record prices to soften the blow of the coronavirus pandemic. Besides, year-over-year gold supply is near-record. Meanwhile, central bank purchases are expected to pick up next year.
The World Gold Council said the third quarter saw central banks become net sellers of 12.1 tonnes compared to net purchases of 141.9 tonnes last year. Russia stood out with its first net sales in 13 years. With gold prices high, some central banks are selling to raise cash.
A second headwind for gold could be volatility. We may see a strong sell-off in the market if investors panic over an uncertain election outcome. Although, if it did happen, that would be nothing more than a temporary weakness.
The physical purchase of gold has just hit an all-time high
The World Gold Council highlights that the purchase of gold bars and coins increased a staggering 49% year-over-year, reaching 222.1 tons through the end of the third quarter. Low rates and public spending are driving much of this.
Trump has proposed a $1 billion infrastructure plan, while presidential candidate Biden offers a $2 billion green energy and infrastructure plan if he wins.
Krauth says that spending, deficits and debt are headed in one direction: higher. So it’s easy to see why the gold will proceed. If the markets sell strongly, investors will look to raise cash. Be prepared for gold stocks, at least initially, as investors sell to meet margin calls. He believes that we will see a new record before the end of the year.
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