Even socially distanced and muffled by masks it’s easy to overhear what people are asking one another this week:
“Who do you think will win the election?”
I get a slight variation on the question. As the co-author of the new book The Last Gold Rush Ever!: 7 Reasons for the Runaway Gold Market and How You Can Profit from It, I’m asked, “What happens to gold if (insert the name of the candidate the questioner fears most) is elected president?”
A wealth of evidence makes it easy to answer.
Trump’s first term has been remarkably bullish for gold. Gold, just over $1,200 when he took office in 2017, reached an all-time high of $2,089 this summer. That is up 74 percent.
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Past performance may be no guarantee of future success, but gold’s upward trajectory has proven more dependable than Trump’s vow to balance the budget in eight years. US debt exploded under Trump, too. When he moved to Washington the debt was $19.94 trillion. Three years later in January 2020 – before Covid spending – the debt stood at $23.20 trillion. It grew by more than a trillion dollars a year. Little wonder that gold moved higher during in the Trump years.
The best we can do to triangulate the impact of a Biden presidency is to look at the Obama precedent. Biden and his surrogates are clearly offering the electorate a third Obama term. With the political bromide in mind that “personnel is policy,” we note that Biden’s economic team is predictably thick with Obama alums looking to climb another rung on the Washington ladder.
Like Trump, Obama also presided over a powerful surge in gold prices. About $850 at the time of his 2009 inauguration, gold roared to a new record high of $1923 in less than three years. That is a 126 percent increase.
US debt was $10.618 trillion at the beginning of Obama’s tenure. After two terms it was $19.940 trillion. It grew by an average of $1.163 trillion a year.
There is no prospect for federal debt being reined under either another Trump term or under Biden. Indeed, if the debt continues to grow by $2 – 3 trillion a year, it will double by 2030. That means a national debt of $55 – $60 trillion. But long before we get there, the existing debt burden is already producing lower investment and reduced growth. That spells trouble ahead. We overlook at our peril the warning by former Morgan Stanley chief economist Stephen Roach that the dollar is headed for a 35 percent crash next year.
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It is probably also time for the electorate to realize that US monetary policy does not depend overmuch on who wins elections. For more than a century the Federal Reserve has pursued its policies without much regard to the partisan divide. This is evident from the parade of recent Federal Reserve chairmen. Alan Greenspan was first appointed by Ronald Reagan, and then again by Bush the Elder, both Republicans. He was then reappointed by Democrat Bill Clinton. Four years later Clinton then appointed Greenspan to a fourth term. When that term expired it was once again the turn of a Republican, Bush the Younger, who appointed Greenspan for a record fifth term.
Ben Bernanke was originally appointed to head the Fed by George W. Bush. Four years later he was reappointed by Barack Obama. So much for differences between the parties on the fundamental policies that boom and bust credit conditions and determine the value of the dollar for the entire nation. The Fed’s Keynesian policies persist under Republicans and Democrats alike, despite a record that includes a prolonged depression, stagflation, crippling recessions, acrobatic interest rate extremes, and dollar destruction.
And it all happens without regard to who was in the Oval Office. By this summer, the price of gold had climbed more than a hundredfold since the Fed’s inception. That’s policy continuity!
The fiscal policies that have loaded us with a $27 trillion national debt and the monetary policies that have inflated Federal Reserve assets to more than $7 trillion (up more than $3 trillion just since January) are themselves enough to fuel another secular gold bull market like both those of the last 50 years.
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But that’s only part of the story.
When a building goes up in flames, arson investigators don’t just look at the fuel of the original construction material. They look for signs of accelerants that spread the blaze. In The Last Gold Bull Market… Ever!, we detail a series of powerful accelerants already in place for the gold market—among them trade and currency wars, a war on cash, a new Washington enthusiasm for the deprivations of socialism, waning worldwide dollar hegemony, and the demise of America’s global military empire.
As former Reagan Budget Director David Stockman writes in his foreword to our book, these accelerants “will make this bonfire of calamites burn hotter, the dollar lose value faster, and the gold price race higher than those who fail to read this book might ever suspect.”
It is for these reasons that I reply with confidence that if Biden is elected or if Trump is reelected, gold will go higher.
Much higher. Either way.
