How will the US presidential election affect gold prices?

Last week, the world gold price fell after setting an all-time record. The reason why the gold price could not successfully conquer the $2,800/oz mark was profit-taking pressure at the peak and pressure from the upward trend of the USD exchange rate and US Treasury bond yields.

This week, there are two major events that could have a strong impact on the price movements of precious metals such as gold and silver, including the US presidential election on Tuesday (November 5) and the US Federal Reserve's monetary policy meeting ending on Wednesday (November 6).

Gold prices started the new trading week early this morning (November 4) in the Asian market with a slight upward trend. At 7:00 a.m. Vietnam time, spot gold prices increased by 1.2 USD/oz compared to the close of Friday's session in New York, equivalent to an increase of 0.04%, trading at 2,737.7 USD/oz - according to data from the Kitco exchange.

Converted according to the USD selling rate at Vietcombank, this price is equivalent to approximately 84 million VND/tael.

THE DELICIOUS BALANCE OF GOLD PRICES

Analysts believe that before the US election results, gold prices will continue to fluctuate due to investors' uncertain psychology: on the one hand, they want to take profits at the still high price range, on the other hand, they are worried that gold prices may increase even higher after the election - the fear of missing out (FOMO) psychology has contributed to "fueling" the recent gold price fever. However, the US election results could lead to a major turning point for gold prices.

Speaking to MarketWatch, Adam Koos, president of Libertas Wealth Management Group, said Thursday's sharp drop in gold prices was "a reminder of the delicate balance that gold is trying to maintain."

“US Treasury yields are still rising, putting downward pressure on gold, especially when riskier assets like stocks are being sold off,” Koos said. The expert said gold prices are facing “typical push-pull” factors as investors need liquidity when facing losses in their stock portfolios, leading to even gold “not being safe enough when the market’s risk appetite is declining.”

GoldSeek.com President Peter Spina noted that gold prices have been rising steadily and steadily for months. He said it is difficult to determine whether last week’s decline will quickly reverse in the next few days or lead to a deeper correction that will last several weeks.

The U.S. election is likely to cause volatility in gold prices this week, but so far the impact on gold is positive, as uncertainty has increased demand for gold as a hedge against risk, Spina said. Neither candidate has come up with a plan to address the federal government’s trillion-dollar budget deficit, which will lead to rising interest payments on U.S. debt and a larger deficit.

With the increase in debt, gold will play its role as a safe haven. Mr. Spina predicts that regardless of whether Mr. Donald Trump or Ms. Kamala Harris wins, gold prices will find opportunities to increase after the US election.

Looking deeper, Mr. Koos said that the US election could create a major turning point for gold prices, but the direction of gold prices in case one candidate wins will not be exactly the same as if the other candidate wins.

Volatility Will Increase

If Trump wins, “markets may appreciate deregulation and business-friendly policies. This could initially boost the dollar and put downward pressure on gold,” Koos said. However, “if these policies increase inflation concerns and escalate trade tensions, gold could find support as investors seek protection from risk.”

In the event of a Harris victory, that outcome could “stir up expectations of increased government spending, potentially putting further downward pressure on the US dollar and sending gold prices higher.”

Given differences in trade policy, spending and regulation, each candidate could easily sway investor sentiment and impact gold’s appeal as a safe haven. “In short, this election could be a major catalyst for gold’s next move,” Koos said.

Another issue related to gold prices that many experts have talked about recently is that gold prices are still reaching new highs despite the continuous increase in US Treasury bond yields and the USD exchange rate. This is contrary to the usual rule, because the increase in US Treasury bond yields and the USD exchange rate are usually factors that cause gold prices to decrease.

But that pattern held true again this past week, at least on Thursday and Friday, when gold prices fell on those factors. Mr. Koos said those developments reflected that investors were attracted to rising yields.

Looking back, Mr. Koos said that the breakdown of the rules between yields, exchange rates and gold prices has appeared many times before, especially during periods of increased geopolitical instability or macroeconomic shifts. In such a context, US Treasury yields, the USD exchange rate and gold prices can all rise, as happened last October or during the oil crisis in the 1970s.

“The current shift in the geopolitical landscape and the trend towards de-dollarization may lead to an irregular period, but that irregularity is certainly only temporary,” the expert emphasized. Therefore, if we rely on history to predict, the recent increase in yields, exchange rates and gold prices will lead to increased volatility in the coming time, he said.