Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
AI Stock Buying Levels, Ratings, Valuations and Trend Analysis into Market Correction - 17th Jun 21
Stocks, Gold, Silver Markets Inflation Tipping Point - 17th Jun 21
Letting Yourself Relax with Activities That You Might Not Have Considered - 17th Jun 21
RAMPANT MONEY PRINTING INFLATION BIG PICTURE! - 16th Jun 21
The Federal Reserve and Inflation - 16th Jun 21
Inflation Soars 5%! Will Gold Skyrocket? - 16th Jun 21
Stock Market Sentiment Speaks: Inflation Is For Fools - 16th Jun 21
Four News Events That Could Drive Gold Bullion Demand - 16th Jun 21
5 ways that crypto is changing the face of online casinos - 16th Jun 21
Transitory Inflation Debate - 15th Jun 21
USDX: The Cleanest Shirt Among the Dirty Laundry - 15th Jun 21
Inflation and Stock Market SPX Record Highs. PPI, FOMC Meeting in Focus - 15th Jun 21
Stock Market SPX 4310 Right Around the Corner! - 15th Jun 21
AI Stocks Strength vs Weakness - Why Selling Google or Facebook is a Big Mistake! - 14th Jun 21
The Bitcoin Crime Wave Hits - 14th Jun 21
Gold Time for Consolidation and Lower Volatility - 14th Jun 21
More Banks & Investors Are NOT Believing Fed Propaganda - 14th Jun 21
Market Inflation Bets – Squaring or Not - 14th Jun 21
Is Gold Really an Inflation Hedge? - 14th Jun 21
The FED Holds the Market. How Long Will It Last? - 14th Jun 21
Coinbase vs Binance for Bitcoin, Ethereum Crypto Trading & Investing During Bear Market 2021 - 11th Jun 21
Gold Price $4000 – Insurance, A Hedge, An Investment - 11th Jun 21
What Drives Gold Prices? (Don't Say "the Fed!") - 11th Jun 21
Why You Need to Buy and Hold Gold Now - 11th Jun 21
Big Pharma Is Back! Biotech Skyrockets On Biogen’s New Alzheimer Drug Approval - 11th Jun 21
Top 5 AI Tech Stocks Trend Analysis, Buying Levels, Ratings and Valuations - 10th Jun 21
Gold’s Inflation Utility - 10th Jun 21
The Fuel Of The Future That’s 9 Times More Efficient Than Lithium - 10th Jun 21
Challenges facing the law industry in 2021 - 10th Jun 21
SELL USDT Tether Before Ponzi Scheme Implodes Triggering 90% Bitcoin CRASH in Cryptos Lehman Bros - 9th Jun 21
Stock Market Sentiment Speaks: Prepare For Volatility - 9th Jun 21
Gold Mining Stocks: Which Door Will Investors Choose? - 9th Jun 21
Fed ‘Taper’ Talk Is Back: Will a Tantrum Follow? - 9th Jun 21
Scientists Discover New Renewable Fuel 3 Times More Powerful Than Gasoline - 9th Jun 21
How do I Choose an Online Trading Broker? - 9th Jun 21
Fed’s Tools are Broken - 8th Jun 21
Stock Market Approaching an Intermediate peak! - 8th Jun 21
Could This Household Chemical Become The Superfuel Of The Future? - 8th Jun 21
The Return of Inflation. Can Gold Withstand the Dark Side? - 7th Jun 21
Why "Trouble is Brewing" for the U.S. Housing Market - 7th Jun 21
Stock Market Volatility Crash Course (VIX vs VVIX) – Learn How to Profit From Volatility - 7th Jun 21
Computer Vision Is Like Investing in the Internet in the ‘90s - 7th Jun 21
MAPLINS - Sheffield Down Memory Lane, Before the Shop Closed its Doors for the Last Time - 7th Jun 21
Wire Brush vs Block Paving Driveway Weeds - How Much Work, Nest Way to Kill Weeds? - 7th Jun 21
When Markets Get Scared and Reverse - 7th Jun 21
Is A New Superfuel About To Take Over Energy Markets? - 7th Jun 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

What Does Biden Imply for Gold?

Commodities / Gold & Silver 2020 Dec 07, 2020 - 02:59 PM GMT

By: Arkadiusz_Sieron

Commodities America has elected a new President. It was a close race, but Joe Biden eventually won and he will be inaugurated and take office in the White House on January 20. The price of gold rose initially in the aftermath of the elections, only to plunge on the news regarding Pfizer’s vaccine breakthrough, as the chart below shows. This is what we know.

But what’s next for the price of gold? What does a Biden presidency mean for the yellow metal? To answer these vital questions, we will analyze the agenda of the President-elect. On the official Biden-Harris Presidential Transition website , we found that the new administration has four priorities: COVID-19, economic recovery, racial equity, and climate change.



The first issue obviously concerns the pandemic . While Trump remained relatively indecisive as to whether to fight aggressively with the coronavirus or to downplay the threat – which I believe cost him the votes of the elderly and ultimately a second term – Biden seems to be determined to beat the epidemic . He has acknowledged the challenge and promised to listen to science and health professionals, although it remains to be seen whether he will actually do so. Regardless, Biden has a seven-point plan to combat the virus, of which the two most important points are: 1) to ensure all Americans have access to regular, reliable, and free testing; 2) to implement mask mandates nationwide by working with governors and mayors and by asking the American people to do what they do best: step up in a time of crisis.

Boosting testing rates is a great idea. Quick and widespread testing, combined with contact tracing, is believed by many epidemiologists to be the best idea in combatting the virus. The mask mandates, although controversial from the libertarian point of view, could also importantly reduce transmission of COVID-19. Also important is what the plan does not mention. By this I mean the lack of any references to a lockdown. Therefore, Biden’s determination to beat the virus without resorting to a lockdown, is rather negative for gold prices.

The second priority is economic recovery. The most important points of Biden’s agenda concern building more modern infrastructure, which implies higher government spending. Importantly, Biden plans to partially fund these expenditures by reversing some of Trump’s tax cuts for corporations. Moreover, Biden plans to reform the labor market. He proposes more than doubling the minimum wage, raising it from $7.25 to $15 an hour. He also wants to make it easier for workers to organize unions, and to implement universal paid sick days and 12 weeks of paid family and medical leave. Widening access to affordable health care is also a stated goal.

From the economic point of view, such bold reforms in the labor market that would increase labor costs are not the best idea during an economic recovery, when many small and medium entrepreneurs are still struggling to survive in the market. Reversal of tax cuts would also not be welcomed by Wall Street and corporate America. So, Biden’s economic agenda could benefit gold somewhat , especially if higher infrastructure spending is financed by large fiscal deficits and if it further increases public debt.

However, a lot depends on the narrative adopted by market participants . If investors focus not on the rising public debt, but on the revival of infrastructure and economic recovery, then gold may struggle. However, I believe that in the current macroeconomic environment of low real interest rates , rising public debt and risk of higher inflation in the future, gold should perform satisfactorily.

The third priority of racial equity is described in a somewhat vague manner, which takes the form of postulates rather than specific points. The agenda definitely includes police reform legislation to reduce racial disparities within the criminal justice system. The push for greater racial equity shouldn’t impact gold prices significantly.

And finally, Biden also wants to deal with climate change by investing in green infrastructure, and hoping to achieve a carbon pollution-free power sector by 2035 and net-zero emissions, economy-wide, by no later than 2050. This plan is bold and if the new administration focuses too much on the environment, it could easily burden the private sector with regulations and hamper economic growth. So, this can be positive for gold prices, especially when combined with fresh fiscal stimulus, higher government spending, and ballooning federal debt .

To sum up, Biden’s presidency could be somewhat positive for gold prices due to higher government spending and anti-corporate points like the reversal of Trump’s tax cuts and increasing labor costs (raising the minimum wage, etc.). However, Biden’s impact on the gold market is likely to be smaller than previously thought by many analysts. This is because Republicans may remain in control of the Senate (if they win at least one of two seats in Georgia’s runoff in January), with power to block the most radical ideas of the new administration.

Moreover, the Republicans performed above expectations in the elections, gaining seats in the House and almost retaining the White House. It clearly shows that voters do not support the most progressive elements of the Democrats’ agenda. Biden is, therefore, likely to govern more as a centrist rather than a radical leftist, which is positive for the economy, but bad news for gold prices . Nevertheless, investors shouldn’t overestimate the power of the President over the economy. It means that gold’s bull market can continue under Biden’s presidency, unless the macroeconomic outlook changes abruptly and the real interest rates start to rise.

Thank you for reading today’s free analysis. We hope you enjoyed it. If so, we would like to invite you to sign up for our free gold newsletter.  Once you sign up, you’ll also get 7-day no-obligation trial of all our premium gold services, including our Gold & Silver Trading Alerts. Sign up today!

Arkadiusz Sieron
Sunshine Profits‘ Market Overview Editor

Disclaimer

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

Arkadiusz Sieron Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in