2020 US election: Impact on gold prices

Market Analysis /

With the US elections around the corner and political tensions running high, how is it likely to affect gold prices? In this article, we analyze three different election scenarios and their impact on gold prices.

Scenario 1 : Biden Presidency

In the first scenario, Biden wins the election while Democrats take full control of the House and Senate.

This could provide a boost to gold prices as the dollar-denominated asset benefits from a weaker dollar. Under a Biden presidency, we could see less aggressive protectionist policies and more favourable bilateral trade agreements with US NATO allies in Europe, resulting in a weaker dollar, which had previously benefited under Trump’s aggressive fiscal stimulus at home and trade protectionism abroad

Elsewhere, Biden’s commitment includes a $1.7 trillion climate policy and a $1.3 trillion infrastructure improvement plan, while he remains committed to avoiding an expansion of government debt. He is also expected to bring in corporate and capital gains tax hikes and industry regulations which could put a further strain on the value of the dollar, making gold more appealing an alternative safe-haven investment, thereby boosting gold prices.

Scenario 2 : Trump Presidency

A second term of a Trump administration could benefit gold prices as Trump is expected to continue relying on tariffs to put the US in a more advantageous position and negotiate better trade agreements. Meanwhile, Trump would also likely continue using unilateral tools such as new tariffs to address trade concerns with China and the EU, which could heighten existing geopolitical tensions, resulting in a capital flight to safe-haven assets – such as gold – to ride out the storm.

While rising geopolitical tensions could benefit gold as it is often viewed as a safe-haven asset, the appreciation of the dollar could weigh on gold prices as it is a dollar-denominated asset. A majority of the dollar’s strength could be attributed to the escalating tensions over trade policy between the United States and many of its key trading partners. Hence, with Trump back in office, the impact of a weaker dollar could be reduced as the dollar benefits from the aggressive fiscal stimulus at home and trade protectionism abroad. This means that the rally in Gold prices could be weaker under a Trump presidency, as compared to a Biden presidency.  

Scenario 3 : Biden wins the House, Republicans win the Senate

In a third scenario, Biden wins the election but the Republicans still control the Senate.

Given Biden’s tough stance on China, we can expect geopolitical tensions to escalate between these two superpowers, especially in areas of trade practices and technology, which could see the safe-haven asset benefit from risk aversion.

That said, the impact on market risk sentiment is debatable here as there is also a high chance that Biden will restore economic cooperation with Europe and Asia, easing tariffs in the process, which could provide some stability in the markets. Elsewhere, Trump’s tax regime will likely remain, which may keep the markets steadier as the changes will be less impactful and uncertainty reduced, thereby reducing the demand for gold.


Apart from the US election, the macroeconomic landscape continues to be supportive of further upside in gold prices in the long term. With the FED’s commitment to low interest rates, at least until 2022, in a bid to support economic growth and boost employment, this translates to a weaker US dollar, regardless of the election outcome. This could benefit gold prices in the long run, as it is often seen as a hedge against inflation and currency debasement.

The information is not to be construed as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product, or instrument; or to participate in any trading strategy. Readers should seek their own advice. Reproduction or redistribution of this information is not permitted.

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