After the Election, Which Way Will Gold Move?
There’s nothing that markets like more than clarity and certainty, which 2020 has been short of in many ways. Now that the Presidential election is over, we’re still in the midst of vote counting, and it could be days, or even weeks, before the winner is ultimately determined. What does that mean for the price of gold, and for the value of your retirement savings?
What a Biden Victory Would Mean
If Biden wins, he has already promised higher taxes on the wealthy. But analysis of his tax proposals has shown that people at just about all income levels would end up paying higher taxes. And if he were to push through another healthcare proposal along the lines of Obamacare, that would add even more to most Americans’ household expenses.
Some of his proposals he planned to pay for with a financial transactions tax that would tax financial trades in stocks, bonds, and derivatives. That would likely have a decidedly negative effect on stock markets, and could put an end to the bull market stocks have been enjoying for the past several years.
Biden also promised a nationwide mask mandate, as well as other measures to “defeat the virus.” That means that we couldn’t rule out his use of federal power to enforce some sort of nationwide lockdown, further hampering an economy that is still struggling to recover.
What a Trump Victory Would Mean
If President Trump ends up being declared the winner, it’s a positive sign for markets, and an indicator of four more years of business-friendly policies, from legislation to regulations to tax policy. But even if Trump wins a second term, it won’t mean that everything will be rosy for the next four years. The US economy still faces deep structural issues that remain from the 2008 financial crisis and its aftermath, and it has to face the effects of that.
Even without the COVID lockdowns, 2020 was going to be a rough year for the economy. With a debt-fueled stock market bubble running rampant, an ongoing trade war with China, and an increasingly debt-addled population, 2020 was set for turbulence. COVID was merely the cause that precipitated a correction, but the real crash is still ahead of us.
The hopes for a V-shaped recovery never materialized, and now we’re confronted with the reality that the economy is facing severe headwinds. Many state economies still haven’t fully reopened, and with COVID cases rising, the pressure on governors to “do something” will grow. In many cases that could mean a return to lockdowns, which would send the economy crashing despite anything the President does to try to stimulate the economy.
What Will Gold Do?
It’s hard to imagine a case in which the gold price wouldn’t continue moving upward. A Biden Presidency would mean panic in markets, and investors fleeing to gold to protect their assets. But a Trump victory would mean at best a momentary pause in market uncertainty. At some point, the underlying economic fundamentals will find themselves reflected in market behavior, and stocks will finally enter the long-term correction many have been expecting for years. And when that happens, gold could very well see price increases in line with its 2008-2011 bull market, or even better.
Playing a major role in the future of the gold price will be the prospect of any stimulus, whether fiscal or monetary. And no matter who wins the Presidency, the likelihood of stimulus is high. Now that all the electioneering is over, and stimulus is no longer a political football that can be used to score points, there’s a higher probability that Congress will pass a stimulus bill, perhaps even by the end of the year.
One of the questions that will need to be answered is whether Nancy Pelosi takes advantage of her majority to try to push something through before January 3rd, or whether she waits for a smaller majority but a possibly tighter Senate to try to pass some sort of stimulus. But regardless of the timing, further stimulus seems a certainty.
Further stimulus should provide a boost to the gold price, not only because some of that money will eventually trickle down into the gold market, but also because it will signal that the economy remains weak, and that the case for buying gold remains strong. Indeed, it’s hard to imagine that further stimulus could do anything but strengthen the gold price. Whether it’s a weakening economy, further COVID lockdowns, or new government policies weighing on the economy, times like these are made for investing in gold to protect your assets.
Why Gold and Why Now?
If you have assets in a 401(k), IRA, TSP, or similar tax-advantaged retirement account, you’ve probably watched the value of your retirement assets increase tremendously over the past four years. But that could change dramatically over the next year, or even longer. Regardless of who ends up being declared the winner, the US economy seems set to slow down. Even in a best-case scenario in which a President Biden ended the trade war with China, with so many millions of Americans still out of work, economic recovery is going to be slow.
The possibility of a double-dip recession can’t be ruled out either, particularly if COVID case rates begin to climb in more states, and if state governors return to lockdowns. We probably haven’t even scratched the surface of the long-term effects of COVID on the economy, and it won’t be until next year that the full extent of the lockdowns’ effects will be evident.
With so much uncertainty and anxiety surrounding the future of the economy, can you trust that your retirement assets will maintain their value over the next few years? Or will a stock market crash a la 2008 wipe out 50% of your savings today like it did back then?
In these unsettled times, now is the time to introduce some certainty and clarity to your investments. By investing in physical, tangible gold bars and coins, you can bring stability to your investments and ensure that your wealth is there when you need it. Remember gold’s performance in the aftermath of the 2008 crisis, as it nearly tripled in price. We’re seeing a return to an economic climate reminiscent of 2008, and investors who don’t protect themselves now risk seeing their dreams of retirement evaporate into thin air.
Protecting your retirement savings doesn’t have to be difficult. You can even roll over or transfer assets from existing tax-advantaged retirement accounts such as a 401(k), 403(b), TSP, or IRA into a gold IRA, a special form of self-directed IRA that allows you to invest in physical gold coins or bars with all the same tax advantages of your current retirement accounts. If the uncertainty surrounding the election is making you worry about your retirement savings, shouldn’t you start thinking about choosing the safety and security of an investment in gold?