Gold Price Forecast - Where Will Gold Go After The Elections?

November 3, 2020
CFA, Editor & Founder @ Sunshine Profits

silver and gold

Regardless of the tumultuous year that we’ve had so far, Election Day remains the most significant event of the year and what every precious metal trader was waiting for. Given the election’s controversial nature, and all the other risks and uncertainties associated with it, I can definitely say that everyone in the precious metals market is querulous, waiting for the results and what’s going to happen afterwards.

In most of the polls, Biden showed a significant lead over Trump. However, if history is a lesson, the polls were wrong in 2016, and Trump ultimately won the elections, to the surprise of nearly everyone in the marketplace. However, in 2020, there are lots of uncertainties looming regarding the results and how the states cope with the ongoing pandemic, which makes things rather unspecific.

In yesterday’s analysis, I wrote that the market situation is likely to become more specific right before, during, and perhaps shortly after the U.S. presidential elections. And by “specific”, I mean that the markets could begin moving against their previous trends.

That’s precisely what we’re witnessing right now.

Yesterday, I commented on the chart above in the following manner:

(…)

In fact, I wouldn’t be surprised to see a corrective move lower that would trigger a brief move higher in the precious metals and mining stocks. However, that would only be temporary, and not likely to last more than several days.

That’s what we see right now – it’s not a game-changer, but instead, it’s a relatively normal uncertainty-based phenomenon.

Gold is moving higher, but not dramatically so. This is in perfect tune with yesterday’s comments.

And what about gold miners?

Miners rallied – which is also in tune with what I wrote previously in my analyses. On Thursday, after gold had declined significantly (on Wednesday), I’ve indicated the following:

Miners have been undermining gold, which is bearish, and they have also broken below the recent lows, which is also bearish. Moreover, miners have just declined on strong volume after opening the day with a price gap, which at first sight, is bearish.

The theory is that such sessions are particularly bearish, as they supposedly show the bears' strength. But, before applying any trading tip into practice, it’s important to check if it had indeed worked on a given market, especially in the recent past. And the aforementioned did work… In the opposite way!

For the third time, miners are declining substantially during one day on a strong volume. We saw the same thing happening in mid-August and late-September. None of them were followed by lower miner prices. Instead, we’ve witnessed corrective upswings that didn’t change the overall downtrend.

So, from here on in, will miners rally or decline? Overall, the very near-term (until the elections in the U.S. and a day-two after that) is unclear. At this point, a temporary rebound here would not surprise me at all, and if we see one, I expect it to be followed by a major slide. That’s precisely what happened right before and after the elections in 2016.

The summary above remains 100% up-to-date. Miners moved a bit higher, and given today’s pre-market upswing in gold, they might also rally during today’s session. Still, the aforementioned is likely nothing more than a pre-election uncertainty that drives the prices and will most probably subside shortly.

Finally, let’s look at how gold performed after the previous U.S. presidential elections in 2016.

It turns out that on average (the thick red line is the average) based on the elections, nothing really happened. However, if we look at the individual price paths, it is evident that gold reversed its course on election day in 2008 and 2004. The link to 2004 and 2008 might not be as important, due to the fundamental similarities in both years including massive stock price plunges, and precious metals.

Furthermore, since the chart above is based on closing prices only, it misses one major point – the huge 2016 intraday (actually, overnight) reversal, when gold moved over $50 higher only, to slide shortly thereafter.

So, what does all the above mean for gold? Well, it means that my previous comments are completely justified and legitimate. The trend (which right now is down in the short term) is likely to remain intact. But, a counter-trend pop-up is quite possible, and if it is visible, we shouldn’t attribute any major implications to it.

To sum things up, the following weeks are possibly NOT the best time for jumping on the bullish bandwagon. As many times before, what’s profitable initially is rarely the thing that pays off in the long-run. As silver often moves in close relation to the yellow metal, forecasting gold’s rally without a bigger decline first is likely to be misleading.

The times when gold is lastingly trading well above the 2011 highs will come again, but they are unlikely to be seen without being preceded by a sharp drop first.

Naturally, the above is up-to-date at the moment of publishing, and the situation may – and is likely to – change in the future. If you’d like to receive follow-ups to the above analysis, we invite you to sign up for our FREE gold newsletter for daily updates. Sign up today.

Przemyslaw Radomski, CFA
Editor-in-chief
Sunshine Profits - Effective Investments through Diligence and Care

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All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

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The King James Bible mentions gold 417 times. Not once does it mention a paper currency.

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