Gold, an Election Year and Trump: What the Experts Say

It’s only February, but 2020 has already proven to be a wild ride for the resources industry, with commodities most exposed to China taking the biggest battering so far.

Despite the uncertainty and panic over the situation in China, where as of this writing more than 1,300 people had died from the coronavirus (COVID-19) outbreak, it’s still an election year in the US.

Incumbent President Donald Trump looks set to bulldoze any challengers for the Republican nomination, while the Democratic Party is two states deep into its primaries with the race seemingly still wide open for anyone to claim the nomination.

The election has 10 months to go (and started a long time ago), and it’s been baking itself in as background noise for the mining space over that period. As the November 2020 ballot gets closer, it will become clearer whether Trump and his trade war and claimed economic prosperity will continue, or the US will take a different, yet-to-be-determined path.

At the recent Vancouver Resource Investment Conference, the Investing News Network (INN) took the opportunity to ask newsletter writers, mining companies and analysts whether the coming election means anything to them; the questions were varied, but the theme was the same: does the fact that it is an election year change anything?

If a common theme emerged, it was that the election year doesn’t matter as much as the result.

To start, US-focused mining companies approached by INN for an unscientific, unattributed poll responded unanimously that the lead up to the election doesn’t change anything for them, though one added that “the election might, but that’s a question for 2021.”

Another remarked that there is nothing a resources company can do to control its own fortunes when it comes to an election. “There’s so many other things happening that move the needle a lot more. Truth is, there’s nothing you can do about it,” they said.

Two others dipped into the political, with one predicting that it “will become much more difficult to operate if the Democrats happen to win.” The other said they like Trump so far, and they are operating under a “wait-and-see” approach.

Analysts, newsletter writers and investors expect a greater effect from the election due to its impact on sentiment and where it could send prices for commodities and equities.

John Kaiser of Kaiser Research said that for gold, a result either way is unlikely to change the situation.

“It doesn’t really matter what the outcome is, because much of the uncertainty is linked to the Trump administration’s policy, so if Trump is back in, the uncertainty factor is not going back. Trump’s building the deficit to record levels (and) he’s going to keep doing that … if the Democrats get in, they’re not known for decreasing the deficit,” he said.

Kaiser added that the main thing he is looking out for is infrastructure spending — because that would be good for all the metals besides gold.

“The biggest thing that I’m looking for is to see which party comes out and pounds the table and says, ‘When our term starts, we’re going to engage in infrastructure renewal’ — because that’s a promise that Trump has not kept,” he said.

“That of course would boost the deficit even further because you’re going to have the government doing capital spending to repair bridges, redo the grid and all that … so if that theme starts to emerge, and both parties are capable of pushing that theme … then we could have a perfect storm of gold going higher and the macroeconomy not failing, but also staying alive.”

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