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Other
than the US nonfarm payrolls data release on Friday, when it comes to gold
the markets have remained fairly cautious in the run up to the election in
the past couple of weeks or so.
As we
explained last week (when we looked at Obama and the gold price), how
the result of the US election will affect the gold price is an interesting
one. Whilst Democrats and second term presidents are shown to have a greater
probability of driving up the gold price by a greater percentage than that
seen by Republicans and first term Presidents, we were able to conclude that
regardless of who made it into the White House, even if it was Martin Sheen
himself, gold is going up.
But
forgetting about the result, which is what everyone seems to be hanging on
for, it might be worth looking at what normally happens to the gold price around elections –
regardless of who or which party wins.
Gold
price changes remain consistent day to day
 
Apart
from President Carter who saw a significant change in the gold price both the
day before and after his election, the percentage change in the gold price
appears to remain relatively constant. The results of the analysis on
percentage change in the gold price in the days around the election are the
most consistent of all the graphs you will see here.
The
average change in the gold price before the election is 0.21% and after the
election 0.27%, therefore one could argue that the best time to buy gold is the day before in order to
cash in on a gain of just over 0.5% per cent….not exactly something to
get too excited about is it?
What
the election weeks mean for gold prices
As we
discussed in last week’s analysis, the gold price reacts best to
Democratic victories and those who are embarking on their second term. The above
shows the perfect demonstration of this. But it also shows that there is
little consistency in the weeks surrounding the election – i.e. there
is little to go on for deciding how to buy gold this week and next.
Gold
investing in elections months
Once again,
we can learn from first and second terms’ impacts on the gold price
when looking at the months following an election. When the incumbent wins,
the gold price is more likely to see a small percentage increase, if not a
fall, than if a newbie were expected the following month.
Years
surrounding the election and the gold price
On
average we see a smaller increase in the gold price in the run up to the
election; this corresponds brilliantly with this year, a year which seems to
have the naysayers holding their pins ready to ‘pop’ that
imaginary gold bubble.
This
graph should come as a relief to those who chose to invest in gold in the
last year, this price behaviour around an election
seems to be relatively understandable. It should come as a reassurance to
gold investors that gold has a tendency to continue to rise in the years preceding
the next election, but a worry for those who invest in dollar-based assets.
Concluding
thoughts on gold price changes
When we
looked at the impact of tomorrow’s result on the gold price, last week,
we decided that whilst it was interesting that a second term, Democrat
President would be the best thing for the gold price for the short-term it
was really nothing to judge your gold investment options on.
The
fact of the matter is, whether it’s a Democrat, Republican, the day of,
the year after or the month before, the money supply is still outpacing any
relevant requirements. Governments remain inflationary.
Even if
it’s Mitt Romney who wants everyone to look after themselves, he would
still want to be re-elected come 2016. He won’t get in unless the job
numbers go up (cue more spending) and people begin to see a change in their
standard of living (cue more spending). This of course means more money which
the country doesn’t have – and therefore will help the gold
price.
As
someone commented on our earlier article regarding the US election and the
gold price, gold is going up no matter what, we
should instead focus on which President will do the least damage to the rest
of the country and its resources.
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Please
Note: Information published here is provided to aid your thinking and
investment decisions, not lead them. You should independently decide the best
place for your money, and any investment decision you make is done so at your
own risk. Data included here within may already be out of date.
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