November 2024 - Week 2 Edition

Gold Falls on Election Results – Plus Rising Dollar and Mild Inflation Reports

Gold and silver continue to decline in the week after the big Republican sweep of the election. The falling price is largely based on the anticipation of better times in 2025 – including fewer global wars and hot spots, better GDP gains in economic growth, fewer interest rate cuts by the Federal Reserve and perhaps some serious cost-cutting and deficit reduction. The latter is more likely with Elon Musk and Vivek Ramaswamy promising to cut trillions in waste, maybe cutting whole cabinet departments, if necessary.

Ask yourself, did American taxpayers really need to spend $477,000 funding Dr. Anthony Fauci’s experiment to create transgender monkeys?

But don’t get too excited too soon. This is the honeymoon of hope, with new key appointments perhaps over-promising their powers. The “swamp” didn’t earn that name by giving up ground easily. The established government bureaus will dig in, use lawyerly tactics and delay to resist any major reforms to their lifelong job security inside the Beltway. In fact, the resistance is already in motion. And outside our borders, the dictators and warmongers of the world aren’t likely to suddenly lay down their arms and live in peace.

Gold is also down due to the strong dollar and lower inflation, as well as the political situation.

The U.S. Dollar Index (DXY) is up 3% in the week since the election, rising from 103.4 on Tuesday, November 5th to 106.5 a week later.  Gold is down 5% in the same week, so most of gold’s decline is due to the dollar’s rally, meaning that gold is only down about 2% in terms of most other global currencies. So far this year, gold is still up nearly 25% in U.S. dollar terms, but it is up 31.4% in terms of the euro, rising from 1,868 euros on January 1 to 2,456 euros today.

As for inflation, it is not dead, even though many pundits have pronounced it to be dying fast. On Wednesday, November 13^th, the Consumer Price Index (CPI) for October was released, rising just 0.2% for the month. The news sent gold under $2,600 per ounce, down from $2,740 just before the November 5th election results came in and a previous peak near $2,800.

The inflation level for the last 12 months, however, moved up to 2.6% from 2.4% the previous month. Both numbers are well above the Fed’s target level of 2% and the core CPI level, taking out food and energy, was 0.3% for October and 3.3% for the last 12 months, so inflation is far from tame. It’s just that energy and food prices had moderated in the month before the elections.

A little over a year ago, Steve Forbes and I said gold would reach $2,500 in 2024 and he added, “much higher if the wrong people win in November.” Well, the “right people” (in his view, and ours) won the election, so gold has corrected back toward the $2,500 level.  As for 2025, it will still be hard work for President Donald Trump and his team to conquer the budget deficit, wars and other challenges ahead.

How Gold Performs During a Republican “Sweep” in Washington

Basically, when a President overspends, over-inflates or lets global tensions increase, gold rises under those types of leaders.

Congress also has a role in the fate of our country and the price of gold. There have been only two periods since 1971 when the gold price was set free to “float.” That was when the Republicans gained the White House and both Houses of Congress – during the middle four years of George W. Bush (2003 to 2006) and the first two years under Trump (2017 to 2018).

This is how gold performed during the six years in which Republicans earned a clean sweep:

• Bush: Gold gained 86% from the end of 2002 to the end of 2006, rising from $347 to $647 per ounce.
• Trump: Gold rose 21% from the end of 2016 to the end of 2018, rising from $1,141 to $1,279 per ounce.

Putting those six years together, that’s a compounded gain of about 15% per year. The big gains in the G.W. Bush years likely stemmed from the wars he started in Iraq and Afghanistan, plus over-spending on a variety of new programs, unexpected during a Republican sweep.

That’s a danger for President-elect Trump to avoid in his second term – aggressive new spending and wars.

We still see rising gold and silver prices ahead, with predictions of gold hitting $3,000 per ounce by the end of the next year. I strongly encourage investors to add more gold and silver to their investment portfolios during this temporary dip in the market. Contact your professional account representative today to discuss your gold and silver options. Whether it’s investing in gold and silver bullion, adding to your precious metals IRA or finding the rare coin missing from your current collection, our team is here to help you.

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