A 2020 analysis by the financial magazine “Das Investment” concluded that the outcome of US elections has traditionally had no significant impact on the gold price. This held true from the election of Richard Nixon to the re-election of Barack Obama. The decisive factor was that trade and foreign policy remained very similar under Democrats and Republicans for decades. This has changed fundamentally with Donald Trump’s second term. As a result, not only politicians worldwide but also the capital markets are watching the US midterm elections closely, as they could shift the balance of power in the House of Representatives and the Senate.
Trump: from reformer to “lame duck”?
A departure from the current US policy of punitive tariffs and the neglect of transatlantic relations could well influence the gold price. However, this would require that Donald Trump could no longer pursue his political goals after the midterms. He would then be a “lame duck”, because the Democrats, with their potential majorities in Congress, could torpedo Republican bills. This is nevertheless unlikely for several reasons. First, the projected shifts in power in both chambers are not sufficient to enable a filibuster. Second, Trump likes to govern by decree and therefore does not need to seek majorities for many of his decisions.
Democrats: tailwind for the gold price?
In principle, a shift in the majorities in Congress in favour of the Democrats could have a positive effect on the gold price. The result of the midterms would then be a so-called divided government, which could mean a degree of uncertainty for the capital markets. Concerns among companies that a change of government in 2028 would likely bring a departure from protectionism and the reintroduction of environmental regulations could also weigh on the US dollar and boost the gold price. The question at present is how strongly the Democrats will emerge from the midterms. The experience Hillary Clinton had in 2016 shows that positive forecasts for the Democrats have often not materialised as strongly as expected on election day.