Historically, U.S. presidential elections have a substantial impact on gold prices. After all, a change in leadership can bring a change in fiscal policy.
So, how do you trade it heading into elections?
One, invest in gold in the months leading up to the election.
“Charts dating back to the 1970’s, reflect trends of gold prices soaring in the month of September before election day and a significant drop in the final days leading up to the event. On average gold prices continue to decrease until January of the following year,” says BellevueRareCoins.com.
For our purposes, if we go back to the presidential elections of 2004 through 2020, we can see that in the months leading up to the election, gold prices push higher on election uncertainty.
Prior to the 2004 presidential election (Bush v. Gore), gold ran from $421.50 in January to a high of $435 heading into the election. We then saw a post-election dip to about $413 in February before it ran to a high of $540 by December 2005.
Prior to the 2008 presidential election (Obama v. McCain), gold ran from about $860 to a high of $936 in October. It then collapsed to a low of $708.30 thanks to the subprime fiasco. Following that dip, gold would eventually rally back to a high of $1,185 by November 2009.
Prior to the 2012 election (Obama v. Romney), gold rallied from a January low of $1,556.80 to a high of $1,733 by the time of the election. Following that election, gold collapsed to a low of $1,395 by April 2013.
Prior to the 2016 election (Trump v. Clinton), gold rallied from a January low of $1,061 to a high of $1,308 by the election. Gold then plummeted post-election to a low of about $1,125 before recovering to $1,309.30 by December.
Prior to the 2020 election (Trump v. Biden), gold jumped from a January low of about $1,519.70 to a $1,912.20 by November. Post-election, gold dipped to about $1,776.50 to a high of $1,962.50 by December.
Two, invest in gold on any pullbacks between election day and Inauguration.
“Since 1980, in the two-week periods following a presidential election, Democratic victories saw an average gold price increase of 0.5% while that same period for Republican victories produced an average price drop of 1.1%, according to the U.S. Money Reserve study,” according to Deseret News.
“The impact is even greater during the period between Election Day and Inauguration Day. Democratic presidential election wins led to an average gold price increase of 1.5%, while Republican wins brought a 5.5% decrease on average.”
If we go back to the last Republican win with President Trump, we can see that between election day and Inauguration day, gold fell from about $1,309 to a low of $1,125. However, in the months that followed, gold rallied back to a high of $1,362.
Prior to that victory, Republican President George Bush Jr. had a positive impact on gold prices. In fact, gold ran from about $377 to $428 ahead of the Inauguration. Then, following a brief pullback to $390, it ran back to about $440.
Three, invest in gold no matter who wins the election.
It also doesn’t matter who wins the election, as once pointed out by HSBC analysts.
“In addition to economic and financial events, gold is sensitive to geopolitical and even social developments,” they said, as quoted by Markets Insider.
“This US election may be particularly important in setting the course of US economic policy and foreign policy and hence for gold prices, given the severity of the challenges facing the economy (including still-sluggish economic growth, income inequality, high debt levels and low productivity) and foreign policy entanglements and challenges.”
That being said, there are a few ways to invest in gold.
For one, we can use exchange-traded funds (ETF), such as:
VanEck Vectors Gold Miners ETF (GDX)
One of the best ways to diversify at less cost is with an ETF, such as the VanEck Vectors Gold Miners ETF (GDX). Not only can you gain access to some of the biggest gold stocks in the world, you can do so at less cost.
With an expense ratio of 0.51%, the ETF holds positions in Newmont Corp., Barrick Gold, Franco-Nevada, Agnico Eagle Mines, Gold Fields, and Wheaton Precious Metals to name a few.
Even better, shares of mining stocks often outperform the price of gold. That’s because higher gold prices can result in increased profit margins and free cash flow for gold miners. In addition, top gold miners often have limited exposure to riskier mining projects.
Some of the fund’s top holdings include Newmont, Agnico Eagle Mines, Barrick Gold, Wheaton Precious Metals, Franco-Nevada, and Royal Gold to name a few of the top ones.
Newmont (NEM).
Yielding 2.26%, Newmont is the world’s leading gold company and a producer of copper, silver, zinc and lead. Even better, its world-class portfolio of assets, prospects and talent is anchored in favorable mining jurisdictions in Africa, Australia, Latin America & Caribbean, North America, and Papua New Guinea. It’s also the only gold producer listed in the S&P 500 Index.
Barrick Gold (GOLD).
With a yield of 2.23%, Barrick Gold (GOLD) operates mines and projects in North and South America, Africa, Papua New Guinea and Saudi Arabia, its portfolio spans the world’s most prolific gold districts in the world. It also has plans to boost its mine output by about 30% by the end of the decade. Better, the company has an attractive asset base with about 69 million ounces in proven and probable reserves.
Helping, the company says its on schedule to meet production targets for 2024.
“Despite lower production in Q1 due to planned maintenance and mining of lower grade ores, resulting in slightly higher costs, the company expects to increase production and reduce costs in the following quarters,” said TipRanks.com.