30
Oct
Expect the unexpected!
Expect the unexpected! Covid-19 infections are surging. Will the price of gold surge too?How will the Covid-19 cases surge affect the gold market?
The record spread has brought the national total to about 8.78 million infections and nearly 227,000 deaths. What’s more frightening, with the recent spike, these numbers are only going to rise higher.
Some epidemiologists even claim that the next several weeks will be the darkest period of this pandemic. As a reminder, the second wave of the Spanish Flu was the worst and most lethal – let’s hope that history will not repeat itself when it comes to the coronavirus infections.
However, what is really disturbing is that in certain states, the rising cases of Covid-19 are threatening the healthcare’s capacity that needs to deal with the pandemic. Therefore, we ask you to please stay careful and take care of yourself as your number one priority!
It seems that this time, people were expecting the second wave of the pandemic and are slightly less frightened. But, if the hospitalization rate increases further, the panic may set in again. The second wave implies more social distancing and a slower recovery. It is also an argument for somewhat larger than smaller financial stimulus.
The US presidential election is another issue by itself. Rightly or not, some voters can blame the President for the rising number of infections. Thus, the pandemic increases Biden’s changes, whose potential victory is perceived as a more bullish scenario for gold (especially if Democrats also take full control of the Congress).
Although Biden is believed to be more inflationary and positive for the gold prices, as a response to the election results, the markets can behave unexpectedly, especially in the short-term. As a reminder, many analysts believed that Trump would be very bullish for the gold prices. Of course, gold gained significantly during his presidency, and, yes, it soared during election night, but it quickly reversed and went into a downward trend for months.
Whether we will know the election result already Wednesday morning (as we did four years ago) depends on many factors. If Florida swings to Biden, it seems impossible that Trump will bere-elected and since Florida has already started counting mail votes,officials expect the results to be ready in the early morning hours CET. If the election is more contested, we may not know the result for several weeks. That said, remember that all disputes must be solved by 8 December. From a market and economic perspective, the most important thing is that we get a clean sweep (i.e. the same party wins the Presidency, the Senate and the House), as it would make it easier to pass another relief package, so in that sense the Congressional election is more important than the Presidential election. We think markets will react positively to a clean sweep (GOLD UP), while markets may sell off in case of a divided Congress (GOLD CRASH). We think the most likely outcome is a Democratic clean sweep but it is noteworthy that Trump and the Republicans have rebounded slightly in recent weeks and Biden and Trump are now neck and neck in Florida.
In any case, the elections may be of less importance than many people believe. After all, no matter who is elected, the next president will deliver a large financial stimulus, because the pressure from businesses, Wall Street, states, and people is simply too big. The increases in fiscal deficits, public debt, and the Fed’s balance sheet should support the gold prices.
All these reasons are fundamentally positive for the yellow metal. 1947-1966-1990-2020-2066 Stops ahead.
Click to Explore The Ways Mr. Trump / Mr. Biden can win U.S. Elections 2020
