The U.S. election has been hanging over market sentiment for much of 2024 and has been an important contributor to the sharp rise in gold prices so far this year. With the event now behind the market, markets will have to start parsing what the outcomes, including a unified Republican government able to shove through radical social, political, economic, environmental, and other new policies means for gold,  other precious metals, and the broader economic factors that play important roles in determining supply, demand, and price for all of these metals.

Even prior to knowing the outcome of this election, CPM Group had been projecting higher gold and silver prices over the next several quarters and that is still the base case. These projections were predicated on a complex analysis of a complex set of factors. Now that the political composition of the U.S. government for the next two to four years is clearer, these projections will be reviewed on an an ongoing basis and are likely to be changed by CPM’s analysts going forward.

The revised outlook necessarily will also take into account the many government changes around the world, which has seen the majority of nations hold major elections this year.

Precious metals prices declined sharply on 6 November, following the election. The Republican party has won the presedential race, are in control of the Senate, and at the time of writing this report are leading the race for control of the House.

The first reaction in the market to a Trump presidency is a jump in stocks, Bitcoin, bond yields, and the U.S. dollar. With the uncertanity tied to the election outcome now out of the way, precious metals prices looking somewhat overstreched in recent weeks, and the increase in all of the aforementioned other markets has unsurprisingly created a sharp decline in gold and other precious and base metals prices. Prices could continue to soften in the near future, but the upward trends in gold and silver prices are not expected to change anytime soon as a result of the election outcomes. Indeed, they may accelerate and last longer than CPM and others have been thinking was likely.

Various economic as well as political factors are expected to continue being supportive of gold and silver prices. Any pull back in prices at this time, should be used as a buying opportunity by investors.

Before discussing some of the potential consequences of a second Trump presidency and a unified Republican government, at least four conditioning factors need to be mentioned.

1. 1. As mentioned above, the control of the House of Representatives remains undetermined, at the time of writing this report, although it seems likely that the Republican party will retain control of it. Whether the Democrats or Republicans control the House of Representatives is crucial and central to what happens over the next two and four years. A unified Republican government would be much more forceful. A Democratic part controlled House would serve as a brake on Republican aspirations.
      
      
   2. One must be cognizant of Trump’s inability to be honest and enormous capacity to promise anything and everything but not deliver any of it. His first presidency was littered with undelivered promises. Anyone who has ever stayed in one of his hotels knows about the gap between artifice and undelivered promises on the one hand and delivered realities on the other. What he actually does most likely will vary significantly from what he said he would do. His concepts may not translate into actual policies.
      
      
   3. There are two periods that need to be considered. The interregnum between now and 20 January, when Biden ceases to be president, and the period starting 20 January.
      
      
   4. The Biden Administration could shake off its long record of inaction and bad policy decisions and take decisive steps before ceding office. This is more likely in foreign policies than in domestic and economic ones. For example, The current administration may drop its restraints on the Ukraine military operations to give it a chance to score significant advances before Trump follows through on his promises to throw Ukraine to the Russians. It also could halt shipments of offensive weapons to Israel, and it could advance ordnance shipments to Taiwan in anticipation that the Chinese government would see a Trump Administration as unwilling and uninterested in defending Taiwan from a military settlement of the independence issues.
      
      
   5. A fourth issue that needs to be added to the analysis is the probabilities that a Trump presidency may not last four years. His age, clearly deteriorating physical and mental health, and the recently demonstrated propensity to stimulate murderous rage among well armed former believers in his rhetoric mean that the world may face a J.D. Vance presidency at any point. Additionally, any Congressional front line may not survive mid-term Congressional elections in 2026, the jockeying for which began Wednesday 6 November.

These and other factors need clarification before analysts should lay out scenarios for what comes after 20 January. That said, some things can be speculatively hypothesized at this point.

Economic Effects:

On the economic front, a Trump presidency could result in a potential resurgence in inflation. This expectation is based partly on his promise to increase tariffs (which would increase the cost of goods) and reduce taxes (which would increase people’s spending power). He also has indicated that his administration will support greater oligarchic market concentration, which generally is inflationary.

While the Federal Reserve is an independent government agency, Trump in his last term as president made it very clear that he was unhappy with interest rate levels at that time (which were around half of where they are at present) and could repeat his past actions of putting pressure on the Fed and will eventually replace Powell with someone who is more closely aligend with his own thinking. Powell’s current term will end on 15 May 2026 (around a year and a half into Trump’s second presidency). Immigation is another area that could see a lot of change under a second Trump presidency, which could have an impact on various economic factors that influence precious metals prices. For one, tighter immigation policies under a Trump presidency could put a stress on the supply side of the jobs market, which could potentially increase inflation. The deportation of undocumented immigrants could create a drag on economic growth, meanwhile.

Another issue that is supportive of precious metals prices is the U.S. budget deficit and the debt being issued to finance this deficit. Both the deficit and debt would have balloned under a Harris presidency too, but is projected to grow even more aggressively under a Trump presidency. Based on analysis done by the nonpartisan Committee for a Responsibel Federal Budget, Trump’s plans would increase U.S. debt by an average of $7.75 trillion through 2035. High levels of debt eventually constrain economic growth.

Bond market problems: higher interest rates as a consequence of higher inflation and a unified Congress and government could remove the tax exemption on municipal and state bonds. The Republican party has been wanting to do this for many years and could push ahead, especially in light of its own increases in Federal debt and borrowing. In the election there were 908 bond propositions across the country totaling $149 billion. They would have tougher sales and higher rates if Congress did that, although such a move would be a few quarters away at the soonest.

Political Impact

Political risk has been one of the most important factors supporting gold prices in recent years. There are a lot of political problems around the world whether domestic or cross border and these risks and problems are not likely to be resolved anytime soon. While a solution may be found for some of the current issues, other dormant or new political problems may emerge in coming years.

During his previous presidency Trump demonstrated that he is doubtful of the value of allies. Strained relations with U.S. allies could mean a weakening in the power of these allies against countries that have been enemies of the West. It would also reduce the power and influence the U.S. will be able to exert on various political and economic issues around the world. All of this could over the medium to long term create more political problems and upheavals.

All of these factors collectively suggest that gold and silver should benefit as portfolio diversifiers.

Platinum and palladium, meanwhile, could benefit from Trump’s less supportive policies toward the electric vehicle market. There could be a roll back or possible elimination of incentives to promote the adoption as well as production of electric vehicles in the United States. While EV adoption in the United States already was slowing a further reduction in incentives could reduce adoption even more and provide some further support to platinum and palladium fabrication demand and prices.