Here we are. Election season. As if that is not enough, there’s this stimulus chaos, airline bailout struggle, and the ever present Covid-19.
Optimism over more federal fiscal aid has pushed the stock market and gold higher at the end the week.
Trump tweeted on Friday: “COVID Relief Negotiations are moving along. Go Big!”
The news came amid reports that the White House will increase its coronavirus stimulus offer to $1.8 trillion.
In response, the U.S. dollar index continued to weaken, stocks climbed, and gold advanced 2%. But then the stimulus package talks fell through and do you know what happened to gold?
It kept climbing.
Gold is apolitical. Amoral.
Gold is what is there when everything else isn’t. When there is no political instability, gold is there as a hedge. When there is no economic certainty, gold is there as a safe haven investment.
The key is in looking at gold long-term.
Gold’s bullish outlook.
Both candidates laid out a plan to provide upwards of $5 trillion in possible economic assistance. That’s a lot of dollars printed and not a lot of GDP to match it.
The inflation expectations support much higher gold prices in the long-term, especially with $3.5 trillion already spent.
On top of all that spending, the U.S. central bank will now be keeping rates low until inflation is above 2% for an extended period of time. That would lead to more dollar weakness and stronger gold.
Expect everyone to turn to gold all the way until after elections and I mean way after. Yes, there is a possibility of a contested election result but the uncertainty goes beyond that.
Whoever wins must stabilize the economy and start concrete and tangible recovery.
Until then, gold is the only option of many investors.