(Kitco News) - With less than four months before Americans head to the polls to vote for a new President, geopolitical uncertainty is ramping up, which will continue to support safe-haven demand for gold according to the latest report from the World Gold Council.
Even before the summer, the polarization in American politics was going to make the 2024 election extremely contentious; however, volatility has been kicked into high gear following the attempted assassination of former President and Republican candidate Donald Trump.
Meanwhile, incumbent Democratic President Joe Biden dropped out of the race this past weekend, and within 48 hours, Vice President Kamala Harris secured enough delegate votes to become the new presumptive candidate ahead of the Democratic National Party Convention next month.
Trump continues to lead in many polls so far; however, political analysts have said that momentum can easily change in the next three months as Harris appears to be energizing her party. The WGC said this uncertainty and geopolitical volatility could continue to support gold prices.
“Given the US's pivotal role in the global economy, coupled with the prevailing geopolitical uncertainties, the upcoming presidential election is viewed by many as a watershed moment with far-reaching implications,” the analysts said in the report. “Historically, the US election has not been seen as a geopolitical risk, but both the world and the US electorate remain highly polarized. This, in turn, highlights the need for robust hedges in investor portfolios, a role that gold fulfills effectively.”
The WGC noted that historically, physical gold demand tends to increase when a Democrat President is in power. However, they don’t see any statistically significant advantage from one party to the other.
“Overall, our analysis of gold and US presidential elections suggests that gold is not reacting directly to party affiliation or changes in leadership. Rather, it highlights the relevance of key global macroeconomic drivers of gold’s performance in contrast to specific local dynamics,” the analysts said.
The WGC noted that gold has done well during both the Trump and Biden administrations and there is no reason to assume that this trend won’t continue with new leadership.
With Trump currently leading in many polls, the analysts at the WGC said that there is a growing base-case scenario that gold will continue to benefit as a safe-haven hedge against geopolitical uncertainty.
“If Trump is elected, he will likely confront a more polarized world than during his previous term,” the analysts said. “As such, global markets may be more reactive to the direction of his policies – especially foreign ones. For instance, recent commentary from Trump on NATO may signal continued geopolitical uncertainty.”
On the other hand, a Harris administration could face significant pushback if they try to implement reforms.
“A Democratic presidency with similar policies to Biden's may meet a divided Congress and have difficulty in passing legislation,” the analysts said.
