It's election homestretch for Trump and Biden, but which asset is the post-election winner?
(Kitco News) With just days to go until the U.S. election, which asset class will be the winner once the results start to come in?
No matter who is elected, the gold sector is looking great because markets will not be forgetting how much money has been printed to support the world's economies, said Walsh Trading co-director Sean Lusk.
Democratic candidate Joe Biden is currently leading in the polls, with 51% currently preferring Biden while 42% are backing the incumbent President Donald Trump, according to Ipsos.
In case the polls are right and markets do see a Democratic sweep at the polls, investors, who are mostly waiting on the sidelines at the moment, will want to move their money away from equities and more towards gold, silver, crypto, and mining stocks, Lusk told Kitco News on Friday.
"If it's the Democrats and they sweep the House and Senate, you're going to see a massive amount of stimulus on top of an increase in taxes. You could see a flush out in the stock market, where investors will be looking to look to park money somewhere. And if it's going to be a combination between gold, crypto, gold mining stocks, and ETFs," Lusk said. "The big winners here in the longer-term will be gold, silver, platinum and palladium."
Raising taxes will not create an environment that will see money flocking into the U.S. stock market, he added. "It's questionable whether the money will go into the U.S. stocks, especially if we get a policy that dictates higher taxes on corporate rates, higher taxes on 401Ks, higher taxes on income tax," Lusk said. "That's not going to be a recipe for an influx of money into stocks, especially in a scenario of a Democratic sweep at the polls. They're going to want sweeping changes."
Even if polls are wrong and the outcome is Trump, the economies around the world have printed too much money and the world is not likely to go back to normal anytime soon.
"We've printed so much money and more is to be printed. And it's not just us; every central bank in the world has taken the same action. And you just wonder about this house of cards falling. You are seeing a resurgence in cases throughout the world, likely further lockdowns, quarantines, which depress economic activity." Lusk noted. "The Federal Reserve has already admitted that it won't stop supporting the Treasury market. And I don't know if they have a way out of this."
Gold has had an incredible year already, and it has more room to go higher, according to Lusk, who sees potential for the precious metal to rise another 10%-15% into the year-end.
"For gold, 10% since the start of the year was about $1,675 an ounce, and we achieved that. Another 10% from there was $1,827. Up 25% on the year is around $1,903, which is where we're at currently. But 30% was $1,980, and we've been above that," he said. "We're poised to go maybe another 10%-15% by year-end. Wouldn't conditions warrant a move like that? I think they would."
After a few months of consolidation and some profit-taking, gold remains very well supported, especially in light of the growing debt problem.
"Any time we print more of something, it's worth less," Lusk said. "Central banks are not going to be dumping any gold because they'll have to use it — Russia, China, Turkey, just to name a few — to support their weak currencies."
September and October proved that no one wants to sell gold at $1,850-60 an ounce level, which has created a great support level for the precious metal.
"This year is a perfect storm of bullishness for gold. The percentage levels tell me that the market is comfortable here at $1,900, taking a wait-and-see approach. You have a tremendous long in the market," Lusk said.
In the short-term, Lusk projects for gold to be the big winner with a target of $2,500 an ounce by early 2021. "Conditions would warrant that," he noted.
Longer-term, the damage from the coronavirus crisis will take years to recover. For gold, this means that prices will continue to hit new record highs as the years go by.
"You can make a case where the gold price could move to $5,000 an ounce in the next 10 years. Where else will the money flow? And we have a lot of money sitting on the sidelines," Lusk said. "As long as the virus sticks around and we have these ramifications of shutdowns and increased cases, we're going to be on the defensive here as far as the stock market."