The impact of U.S. elections on gold prices: Past trends and 2024 outlook

Historically, U.S. elections have sparked considerable movement in the gold market, largely due to political uncertainty and the potential for shifting economic policies. Examining the 2016 and 2020 elections provides insight into how gold may respond to the upcoming 2024 presidential race.

2016 election: Trump's victory and gold's initial surge

During the 2016 election, gold saw a notable rise in the weeks leading up to the contest between Donald Trump and Hillary Clinton. As the November 8 election date neared, gold prices gained about $50, peaking at just above $1,300 per ounce on November 4. The lead-up to Election Day was characterized by heightened market anxiety, with investors seeking safe-haven assets such as gold to hedge against the possibility of political instability.

However, after Trump secured his unexpected victory, gold reversed its upward trajectory. Prices dropped sharply, reaching as low as $1,128 by mid-December. This drop reflected a rapid shift in market sentiment as Trump's win spurred confidence in economic growth, driving stock markets higher and diminishing gold's appeal as a safe haven. By January 2017, gold prices had recovered slightly, climbing back above the $1,200 mark.

2020 election: Biden's win and gold's volatility

The 2020 election brought a similar pattern of volatility. In the week leading up to the November 3 vote, gold was trading at around $1,900, though it dipped as low as $1,867 on October 30. After Joe Biden won the election, gold briefly rallied, spiking from $1,908 on Election Day to $1,951 by November 6.

However, this rally was short-lived as post-election turmoil — including vote recounts and legal challenges initiated by Trump — weighed on market sentiment. Gold prices retreated, falling below $1,800 as uncertainty persisted into December. The contentious political environment created significant volatility, with gold regaining strength later that month, ahead of the January 6, 2021 certification of Biden’s victory.

Gold's performance during trump's presidency

Throughout Trump’s presidency, the gold price experienced significant growth. When Trump took office on January 20, 2017, gold was priced at $1,209 per ounce. By the end of his term in January 2021, gold had surged to $1,839.

While these gains cannot be solely attributed to Trump's policies, his administration’s actions did play a role in shaping global economic conditions that influenced gold prices. Trade wars, particularly with China, were a hallmark of Trump’s time in office. His administration imposed tariffs on a wide range of Chinese goods, creating global trade tensions that contributed to gold’s rise as a safe haven.

Beyond trade, Trump’s decision to withdraw from the Iran nuclear deal and impose sanctions on countries trading with Iran further unsettled markets, driving demand for gold. Protectionist policies and sanctions also undermined confidence in the U.S. dollar, particularly among the BRICS nations (Brazil, Russia, India, China, and South Africa), which began to explore alternatives to the U.S. dollar as a global reserve currency.

Another major factor that shaped gold's performance during Trump's presidency was the outbreak of the COVID-19 pandemic. The pandemic’s economic fallout led to unprecedented levels of government stimulus, further boosting gold prices as investors sought refuge from inflationary pressures and market instability.

A second Trump term: What could it mean for gold?

If Trump were to win a second term in 2024, it is likely that many of the same protectionist policies from his first term would be reinstated. Trump has already signaled a return to his “America First” rhetoric, with a renewed focus on imposing tariffs. In particular, Trump has floated the idea of a 60% tariff on all Chinese goods, a move that would likely escalate tensions between the two nations and increase demand for safe-haven assets like gold.

Additionally, Trump's second term could see further deterioration in U.S. relations with key trading partners, pushing global investors to turn to gold as a hedge against market instability and geopolitical risk.

Biden’s presidency and gold's performance

Under Biden, gold has also seen significant gains. When Biden took office in January 2021, gold was priced at $1,871 per ounce. By October 2024, the price had climbed to a record high of $2,740, driven by ongoing inflationary pressures and expectations of future interest rate cuts.

Biden’s administration came into power amid the COVID-19 pandemic, with inflation soaring due to supply chain disruptions and pent-up demand. While the Federal Reserve's efforts to combat inflation by raising interest rates initially dampened gold’s rise, the metal has reached new highs as the Fed has signaled an eventual shift to rate cuts. The anticipation of these cuts, combined with ongoing economic uncertainty, has supported gold's upward trajectory.

The Federal Reserve’s role

The Federal Reserve's decisions on interest rates will continue to play a crucial role in shaping gold’s performance, especially in the days following the 2024 election. The Federal Open Market Committee (FOMC) is set to meet from November 6 to 7, just one day after the election, and any rate decision could have an immediate impact on the gold market.

Historically, gold tends to rise when interest rates are lower, as reduced yields on other assets make gold more attractive. In 2024, despite elevated interest rates, gold has managed to reach record highs, largely driven by the expectation of future rate cuts. If the Fed were to announce a post-election rate cut, it could provide further support for gold prices.

What to Expect for Gold Post-Election

As the 2024 election approaches, investors will closely monitor both political developments and the Federal Reserve’s actions. A rate cut following the election could be a key driver for gold, as lower rates typically support the metal’s price. Additionally, any geopolitical tensions that arise in the aftermath of the election, particularly in relation to U.S.-China trade relations, could further boost gold as a safe-haven asset.

Treasuries face several headwinds, including a ballooning US deficit and robust economic growth that could revive inflationary pressures. Inflation, while subdued after the near double-digit levels seen in 2022, is once again picking up. After bottoming in December, input prices are rising faster, with the core producer price index—excluding volatile food and energy items—now climbing 2.8% year-over-year, up from 2.0% at the end of 2023. This uptick in input costs is now reaching levels not seen in over a decade, except during extreme disruptions like the pandemic and supply chain crises.

The Federal Reserve’s latest Beige Book echoes this concern, as businesses report rising input costs outpacing their ability to increase selling prices, which is squeezing profit margins. For the broader US economy, which remains resilient, this trend could undercut earnings growth and cast a shadow over the equity outlook for 2025. The worst-case scenario would be a combination of inflation eroding corporate profits and delaying Fed rate cuts, potentially impacting both risk assets and traditionally safer investments like Treasuries.

With low unemployment and inflation still above target, the risk of economic overheating is intensified by tax cuts and ongoing deficit spending. According to recent forecasts, Donald Trump’s proposed tax cuts could more than double the projected deficit compared to Kamala Harris' policies, adding $7.5 trillion to the deficit over the next decade.

To hedge against such risks, one could consider gold, which has surged as it became clear that elevated US deficit spending would continue post-pandemic. With more significant deficits expected, gold may continue to perform strongly as investors seek protection against inflation and fiscal strain.