Gold's Election-Year Surge Could Unlock 30% Upside By December

It almost feels intentional, most investors have had their eyes diverted away from the “Gold Trade” over the last two months.

But there’s no time that the “Gold Trade” can be more fruitful than now.

Historically, Gold is a so-so trade when it comes to its returns during an election year.

It doesn’t tend to follow the same bullish pattern that equities do, ad there’s a perfectly logical reason for that.

Let’s think of this from a love/hate perspective…

Equities love one thing. Certainty.  It doesn’t matter what form that certainty comes in, stocks love it.  Certainty from an earnings report, the certainty of knowing that a CEO is staying for another year, and certainty of knowing which candidate will win in November.

That last one is the problem right now.

With the poll so tight and the mud starting to be slinged, investors are starting to feel a little more uncertainty about who will walk away from the election as the winner.

We’ve seen that scenario play out before, a few times.

Uncertainty after the elections = instant volatility and lower prices for equities.

But that’s not the case with gold.  It’s quite the opposite.

Gold thrives in uncertain times because investors have long thought of it as the “safety” trade.

Sure, Bitcoin and a few other cryptocurrencies have been trying to position themselves as “safety trades”, but gold is the one that everyone will run to when things get spicy with the election.

This Year is Different Though

We’re going to see gold shoot higher as the election nears, that’s as given as “given” can get on Wall Street.

But there’s another bullish driver for Gold that’s about to rear its bullish head for gold prices.

The Fed and the Dollar

Investors have been wringing their hands as they wait for the Fed to lower interest rates.  Now, historically, the Fed tries to avoid changing rates ahead of an election as it could be viewed as trying to influence the election results.

This year is different.  Jerome Powell and the rest of the FOMC have backed themselves into a corner as they’ve waited as long as possible for their various inflation gauges to get as close to their target as possible before lower rates.

The masses won’t have them wait any longer.

Right now, the treasury market is reflecting a 100% chance that rates get lowered by 0.25% at the next meeting on September 18.  Something dire will have to happen between now and then to see that change.

This Means the Dollar is Heading Lower

That’s right, there’s nowhere for the dollar to go other than down, and that’s good news for the gold bugs.

Gold and the dollar can move in the same direction for short periods of time, but in general the price of gold will move higher as the U.S. Dollar declines.

This is the situation that we are looking at as we head into the election

• Uncertainty surrounding the election
• The Fed lowers interest rates which pressures the dollar
• The lower dollar acts as a catalyst for gold.

Here’s What the Chart is Telling You

The SPDR Gold Shares (GLD) have spent the last five months trading in a wide range from $215-$230.  That range is in the process of being broken on the top side of the range, suggesting that we’re on the cusp of a volatility rally that will take GLD prices higher.

This break should be the beginning of a new rally that carries gold prices 20-30% higher over the course of the next 3-4 months..

Keep in mind that there are two major catalysts that will play out.  First, the Fed as the FOMC moves to lower rates.  This will push prices of gold higher.

Second, any uncertainty in the market surrounding the elections and any other geopolitical events.

The current chart for gold points to support at $540 with an upside target of $600 over the next 3-4 months.