Moments after US President Donald Trump’s election in 2016, gold fell very quickly; it went from more than $1,300/oz and fell quickly to the $1,100s region. However, well researched critics will also mention the fact that within his first year, gold eventually rallied by $200, taking it from $1,150 by the start of 2017 to $1,350 by the end of the year.
Whilst it’s difficult to assess the state of gold under previous presidents as each circumstance was different and faced alternative, political challenges, it’s still an interesting observation. Gold had a great first year in Obama’s first term, reaching all-time highs. However, all that glittered wasn’t gold as the sought after precious metal suffered four of its worst years ever in his second term.
Under George Bush, gold had eight years of bull market, it climbed it’s way out from sub -$300/oz to more than $900/oz. When Bush was elected for his second term, gold pulled back by 10%.
Gold also pulled back with Bill Clinton was first elected, however during his first year as the US President in 1993, gold rallied. Second terms don’t seem to be the best for presidents and for Clinton it was a terrible time period of gold as it collapsed down to an all-time low of $250/oz.
George Bush senior wasn’t let off of the hook in his one term. It rallied strongly during Ronald Reagan’s second term and if you ask any investor of that time they will tell you quite confidently like during Regan’s first term, investing in gold was quite possibly one of the worst investments you could have made at the time, the metal went from more than $600/oz to a shambolic $300/oz.
Overall, comparing first and second terms and interchanging between Democrat or Republican doesn’t necessarily show a strong pattern, there are small notes we can take note of. There is one small note to remember and that is that sell-offs are most likely to take place not long after most elections during the November to January timeframe, conveniently just before the incumbent takes office.
Let’s have a closer look at where gold is at right now; it extended the previous day’s retracement slide from near two-week tops. There are anticipations of lower interest rates in the US which is said may help limit any deeper losses. Gold has traded with minimal negative bias in the early North American session and has most recently been seen trading closer towards its lower end of its daily trading range which is a little below $1960.
On Wednesday the sought after metal witnessed some selling through the early part of the trading action.It’s important to note that spot gold prices were trading above US$1970/oz after hitting US$1923/oz on Friday.
It is expected that we will witness a “lower for longer” with US interest rates and continuous weakness in the USD index which paves the way for precious metals to thrive; cue gold!
ETF holdings show that, total known gold holdings reported back inflows of roughly 367koz over the course of the last 4 days, taking total holdings to 108.9moz.
US oil production has risen, and by 4.2% MoM in June to average 10.44MMbbls/d. This is an indication of producers deciding to bring back production that they slowed down in April and May due to the low price environment. Given the big shake many industries faced from the Covid-19 pandemic we must still be patient to see anything completely back to normal for a while.