US Elections 2024 and Gold performance

Introduction: 

Uncertainty is one of the main features related to the selection of the new US President, due to the different methodologies of each party and its diverse economic policies; according to this situation, questions may turn to assets that may flourish in such circumstances, with gold at the forefront of those assets that flourish in light of turmoil and uncertainty.

The following is an attempt to study the performance of gold in light of the previous US elections, specifically in its two rounds 2016 and 2020, with the aim of predicting the performance of gold in general during the elections, and predicting the performance of gold from mid-October until the date of the elections on November 5 of this year.

Before studying the status of the previous US elections in numbers, it is worth noting what the World Gold Council's data indicated about the US elections and gold prices historically, as the results of the Council's observations concluded that gold tends to perform below its long-term average in the period surrounding the US elections, which the Council confirmed are non-binding results, given the fundamental factors surrounding gold.

The council even went on to reach conclusions regarding the performance of gold according to the president-elect according to the party to which he belongs, as follows:

- Gold performs better six months after the election of a Republican president and remains stable in the period following the election.

- Gold tends to perform poorly for a Democratic president, and performs below its average in the six months following the election.

The following will examine the US elections and gold during elections since the beginning of this century

* the price at end to September, 2024.

Gold generally tends to rise during the year of the US elections, but this is not a general rule related to elections only, due to the fundamental factors specific to each stage of the elections. To understand what happened in those elections, it was necessary to study the status of the stock market index represented by the S&P 500 index, the US dollar index, the interest rates imposed on the dollar, and the most prominent economic conditions in each of the past election years.

The following can be noted for each election:

- 2000:

The year of the dot-com crisis, which later erupted clearly in 2001, which explains the decline in the US stock index as shown above, and despite this crisis and the elections that occurred in that year, the high interest rates at that time did not allow gold to rise significantly.

- 2004:

This year witnessed low interest rates due to the previous financial crisis (the dot-com crisis), and with these low interest rates, both the stock markets and gold benefited.

- 2008:

During this year, the global financial crisis occurred, during which markets in all their forms were in a state of decline, most notably the stock markets, which lost more than a third of their value, while the gold markets stabilized in preparation for the rise in the following year, which continued until 2011, when it reached its highest levels at that time due to the significant and rapid decrease in interest rates to their lowest levels (from 5.5% to 0.25%).

- 2012:

This year is considered the year of the return of economic activity and the rise in morale regarding the exit from the economic recession and the treatment of the global financial crisis in 2008, so it is possible to notice the rise in the stock markets by twice what the gold markets rose, which in turn also benefited from the lower interest rates, while benefiting from the approaching election season by noting the rise in prices by 13% after the first half of that year and until a month before the US elections at that time.

Last two US Elections and Gold:

As for the two electoral periods of 2016 and 2020, they may be the most ambiguous, given what happened in them, in terms of the election of both Donald Trump and Hillary Clinton in (2016), and Donald Trump and Joe Biden in (2020).

This can be seen in the following figure:

US Elections 2024 and Gold (figure 1): Gold rises since the beginning of the year until August of the 2016 election year

US Elections 2024 and Gold (figure 2): Gold rises since the beginning of the year until August of the 2020 election year

Based on the above charts, it can be noted that either the upward movement of gold continues as in 2020, or an increase as in 2016, with the upward price performance ending a few months before the election date.

But it should be noted that the interest on the dollar was relatively low in those years that coincided with the holding of those two sessions, which traditionally causes gold prices to rise.

US Elections 2024 and Gold Performance:

As for the 2024 elections, which end with one of the most tumultuous US elections, it can be noted that gold continued to hold together and rise by about 25%, and did not take a downward path before the elections as happened in the two sessions previously studied, for the following reasons indicated by many analysts:

- Continuing Middle East conflicts.

- The lack of clarity on the extent of the rapid decline in inflation in the US economy, as it stands at 2.4% before the elections and before the US Federal Reserve meeting on November 7.

- Stock markets are awaiting larger-than-expected financial data, especially from giant companies that will extend even after the elections, such as Nvidia on November 19.

- Trade tensions between America and Europe on the one hand and China on the other, which may affect the course of the global economy in one way or another during the year 2025.

- The ambiguity of the Chinese economy's position in terms of the desired growth and the unclear Chinese government stimulus packages to stimulate the Chinese economy, which is the first factory of the global economy.

Based on the above data, gold markets show each time a significant impact on economic data more clearly, due to the direct relationship between crises and gold prices, or according to the inverse relationship between gold prices and interest rates.

Based on the above, the markets may be on a continuous date either for stability or continuing to rise, even if the election results appear, specifically in light of two basic scenarios:

- The continuation or increase in the intensity of geopolitical tensions.

- A significant setback in economic data that supports a Fed rate cut, such as higher inflation, or deteriorating economic data on the labor market, which in turn negatively affects stocks.