Focus on North America – Dillon Gage Metals’ Terry Hanlon explains how gold reacts to presidential elections
Gold prices generally languish in a year leading up to a US presidential election. For one thing, the incumbent tries to keep the public focused on any positive economic news, and that isn’t good for gold.
Silver prices tend to weaken as well.
We saw the price of gold decline leading into the 2008 presidential election but then rise afterwards. That scenario could play out again this year.
In March 2008, gold reached more than $1,000 an ounce and then dropped to $740 in the election month of November. But after that, gold embarked on a steady advance. During President Barack Obama’s administration the price of gold, in fact, doubled.
Since September 2011, though, gold has retreated heading into the November 2012 vote. It has lost more than $300 from last September’s peak of $1,900 an ounce.
Not only do incumbent presidents try to keep the public focused on good economic news before the election, but the White House also typically tries to jawbone the price of gasoline down to keep inflation in check.
That’s because Americans vote with their wallets – how much more they’re spending on food and gasoline now versus earlier years.
Gasoline prices, though rising in August, are well below their levels last spring. Gold prices, sensitive to inflation, tend to move in the same direction as crude oil and gasoline.
Once the November election is over and no matter which candidate wins, the spotlight can be expected to shift back to the underlying bad news in the US economy. As a nation, the US is spending way beyond its means, is saddled with debt and can’t stay within its debt ceiling.
European nations are in a similar boat. These factors, along with Middle East tensions, are supportive for precious metals longer term. Bad economic news and geopolitical concerns spur investors to buy gold and silver.
If the past is any guide, this may be a good time to invest in precious metal coins like US gold and silver American Eagles or Canadian Maple Leafs, looking for them to rise in value after the November election
Terry Hanlon is president of Dillon Gage Metals, an international wholesale dealer in all major US and world coins, both bullion and numismatic. It offers bullion trading, online trading of physical metal and futures, jewellery trading and liquidation, refining services and estate liquidations.