(Kitco News) – The U.S. elections are now just one day away, and with the presidential race too close to call, analysts at StoneX have provided an election cheat sheet to help gold investors prepare for how markets will react in the event of a Trump or Harris victory.
According to Rhona O’Connell, Head of Market Analysis for EMEA and Asia at StoneX, there are several potential outcomes that gold investors should be prepared for.
In the event of a contested victory, where the next President “may not be known for days, at least,” O’Connell said that uncertainty for the gold market would likely extend, and the yellow metal would “likely challenge $2,800 again and probably succeed.”
Should a clear victor be established early on, she warned that gold is “likely to dip, and that would likely then be well bid.”
If the Republicans sweep the White House and Congress and Donald Trump gets a second term in office, O’Connell predicted gold will go “higher in the medium term due to potentially inflationary policies (corporation tax cuts, tariffs),” and she also sees “heightened geopolitical tension.”
On the flip side, a Democratic sweep would also see gold trend higher “on fears of inflationary forces (tax and spend),” but she noted that they would “probably” offer “more pragmatism on foreign policy.”
The most likely scenario, according to O’Connell, will be a victory for one of the Presidential candidates and a divided Congress, which she said would likely lead to the status quo being maintained.
“Would Congress pass a repeal of the Inflation Reduction Act, for example?” she questioned. “Would inflation become enough of a factor for the Fed to perform a UTurn? Given the weakening in the US labor market, probably not, but don’t rule it out.”
Pivoting to the effect the election will have on gold, O’Connell noted that the current tailwinds include “Geopolitical risk; increasing trade tensions; stresses in the banking systems in three major regions, notably in the small-to-medium sized sector, and especially exposure to property, and (in the US) Commercial Real Estate; the Emergence of the Shadow Banking sector (i.e. unregulated transactions), reminiscent of the Sub-Prime issues in 2007 that led to the Global Financial Crisis in 2008; Continued strong Official Sector purchases – not just because they are taking tonnage off the market but because of the signal that it sends to the markets because the
Official Sector dislikes uncertainty; and Widespread investor interest, notably from High-Net-Worth individuals, Family offices, and other professionals who are back in the market for the long haul.”
As for the headwinds that could spoil gold’s rally to new highs, O’Connell highlighted a potential “reduction in international political or trade tensions,” saying, “Harris is more of a bearish
influence than Trump on this score.”
She also warned that “Any strong inflationary forces and/or associated expectation thereof could force a reversal in monetary policy,” highlighting the potential for the “Official sector going on the retreat,” which she said is unlikely.
The final headwind is “Investors’ conclusion that risks have declined (likely to take a matter of years, compare GFC of 2008),” O’Connell concluded. “It wasn’t until 2013 that professionals bailed out of gold (over 800t of ETF metal went straight into private hands in China).”
According to Matthew Jones, precious metals analyst at Solomon Global, regardless of the outcome, “significant political shifts can unsettle financial markets, and such uncertainty typically fuels volatility, and both can serve as catalysts for higher gold prices.”
“Gold isn’t just a commodity—it’s an economic vote cast in favor of stability when election outcomes are uncertain or contentious,” he said. “Investors seeking peace of mind hedge their bets by holding gold during turbulent political cycles.”
In the event of a Donald Trump victory, Jones warned that “his economic and regulatory policies are a potential cause for concern. His penchant for deregulation could lead to sector-specific disruptions, impacting investor sentiment and, consequently, gold prices. Additionally, policy ambiguity under his administration, compounded by inflationary pressures and geopolitical tensions, could amplify gold’s appeal as a safe-haven asset, driving demand upward.”
“Kamala Harris, meanwhile, has outlined a vision marked by robust government expenditure on social programs, infrastructure, and climate initiatives,” he said. “These policies may exacerbate budget deficits, potentially weakening the dollar and stoking inflation fears. Investors could increasingly turn to gold as a hedge against inflation and a depreciating currency, pushing prices higher. Regulatory uncertainty and potential market instability under her administration would further support gold’s allure.”
“Presidential elections remind us that while leadership can change, the appetite for safe assets like gold are a constant in times of transition,” Jones said.
Looking beyond election-driven safe-haven demand, Jones highlighted this week’s FOMC meeting, where the Federal Reserve is expected to lower interest rates by 25 basis points.
“Gold prices have gained momentum from a softening dollar spurred by last week’s poor jobs report. October payroll data showed the weakest growth since December 2020, reinforcing expectations for further rate cuts,” he noted. “Historically, interest rates and gold prices share an inverse relationship, with lower rates typically favoring higher gold valuations.”
