Now that Nov. 6 is here, it is tempting to look at what might happen to gold prices if the incumbent – U.S. President Barack Obama – wins Election 2012.
Leading into Election Day, traders are the most bullish they have been in 10 weeks. Eighteen of 27 gold analysts contacted by Bloomberg News were expecting higher gold prices in the short-term, while only five of the analysts were bearish.
Holdings in gold exchange-traded funds (ETFs) reached a record 2,588.4 metric tons on Nov. 1, which was valued at $140 billion. According to Bloomberg data, holdings in gold ETFs in the past three months have enjoyed their best run since August 2011.
Of course, the rise in bullishness regarding gold is not only due to the presidential election, but also to continued loose monetary policy from the U.S. Federal Reserve. Gold did rise 70% as the Fed bought $2.3 trillion of debt during the first two rounds of quantitative easing.
So should gold investors expect anything to change if President Obama wins re-election?
Gold Prices if President Obama Wins
Many participants in the gold market think that a victory by President Obama will be just the stimulus needed to push gold through the $2,000 an ounce mark. Recall that Money Morning's Global Resources Specialist Peter Krauth has said that he expects gold to hit $2,200 by April or May.
An Obama victory may move that timetable up according to some in the market.
Tobina Kahn, vice-president of House of Kahn, a Chicago-based jewelry group, told the Financial Times "If Obama gets re-elected gold is going to go through the roof."
The CEO of London bullion brokerage firm Sharps Pixley Ltd., Ross Norman, told Bloomberg that a President Obama win means continued monetary accommodation and currency debasement, which will boost gold as investors try to preserve the value of their assets.
History seems to support his argument. James Steel of HSBC noted to the Financial Times that gold's most dramatic rallies – 1980 and 2011 – have occurred with Democrats occupying the White House.
If President Obama is re-elected, change is still expected at the head of the Federal Reserve. But instead of a Paul Volcker-like figure, President Obama is expected to replace Ben Bernanke with a similar believer in monetary expansion and currency debasement. One of the names being mentioned is Janet Yellin, the current vice-chair of the Fed.
Metals analysts aren't as bullish on gold when it comes to a Mitt Romney victory.
Romney and Gold Prices
Most traders feel that a Romney victory will be negative for gold, at least in the short term.
He is expected to be serious about cutting government spending and helping the country avoid the so-called 'fiscal cliff'. This should then strengthen the U.S. dollar, affecting gold negatively.
Perhaps more important Governor Romney is no fan of Ben Bernanke and is expected to push to get him out of the Fed even before his term expires in January 2014. Depending on whom he appoints as Fed chairman, it may mean the end of excessive money printing. . .there could be no more quantitative easing 'infinity' as the markets have dubbed Ben Bernanke's policies, driving gold higher.
Joni Teves of UBS told the Financial Times "A win by Romney is generally seen as by investors as a downside risk for gold."
Related Articles and News:
- Money Morning:
What to Expect from Gold Prices If Romney Wins Election 2012
- Bloomberg News:
Gold Traders Most Bullish in 10 Weeks on Stimulus: Commodities
- Financial Times:
Romney's Threat to the Gold Price