The U.S. Presidential election two weeks ago has commanded the attention of markets, and much of the world, for months. Gold has not been immune to this. Gold prices have risen sharply since June and July. Part of the strength was uncertainty and concerns about the election outcome. Even so, a host of other factors clearly have been involved, and these should not be ignored, over-looked, downplayed, or forgotten.

The election is largely behind the markets now. It seems almost certain that the Democrat Joe Biden will be the next president, and it seems most likely that the Republicans will maintain control of the Senate. This will result in a continuation of the stalemated government that has been so caustic and unproductive for at least the last 12 years, although arguably for perhaps closer to 24 years. There will be some permutations to the stalemate, but the most likely future is more of the same willful divisiveness in the United States. We may have a more rational, predictable, and mainstream Administration going forward, but we still will have a stalemate government, and that is good for gold.

More critical, the Big Three Issues that have been bullish for gold this year remain in place. They will not be solved soon or easily regardless of the election outcome.  

1. The Pandemic
2. The Recession
3. The Global Political Mess

Even with the approval of several vaccines, the logistical and social acceptance issues facing distribution will mean that a vaccination program will be many months, perhaps roughly one year, before it is publicly effective.  

Additionally, the Senate control will not be resolved until 5 January 2021.

• Any Republican control of the Senate (likely) could impede Administration infrastructure and reconstruction spending.
• A Democratic Congress may also pose problems. In Obama’s first two years he faced more opposition from Congressional Democrats than he did from Republicans.

The policies with the most direct impact on precious metals prices relate to fiscal policy, infrastructure spending, global trade and relations with China, regulatory changes, and climate change. The U.S. government’s international prestige will be slow to be restored, if at all. Monetary policy will remain accommodative, but not necessarily a lower dollar.

All of this is supportive of gold investment demand and prices in the weeks and years to come.

That said, the market today is testing $1,860 and $1,850, critical support levels. A break below that would have a target around $1,650, more than $200 below the market.

With more than 90% of Comex gold trading driven by technical price chart-based trading, much of it run by computers, market participants must be cognizant of the possibility of another major downward drop, if briefly, as U.S. politics get clarified, Brexit outcomes become better defined, and the December Comex contract is rolled forward into February. Gold prices dropped $217 in four days after the August Comex gold futures roll (into December contracts) was behind the market.

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