• As election-led uncertainty builds, gold may potentially help mitigate against prospective spikes in volatility
• Although gold performance has historically shown limited party bias during presidential terms, there has been a wider performance disparity between parties for congressional leadership (see Figure 1)
• Expectations for further fiscal spending and widening budget deficits may potentially benefit gold
This post was written with contributions from the SPDR Gold Strategy Team: George Milling-Stanley, Chief Gold Strategist, and Diego Andrade, Senior Gold Strategist.
While the phrase “this time is different” is famous for being a flawed viewpoint in the investment community, 2020 has certainly put that rule to the test. The impact of the COVID-19 pandemic on the global market and economy has led to a record level of monetary and fiscal stimulus, as well as a persistent cloud of uncertainty. Against this backdrop, gold has shined, with investment demand surging1 and its price reaching a new all-time high2 this year.
Heading into year-end, the divisive US general election has cast a further shadow of ambiguity for investors in 2020 that may help further gold’s momentum. While US politics and the pending election represent an important factor that may impact global markets and volatility in the near term, broader global economic and market implications from future US policy decisions likely remain more impactful over the medium and longer term. That said, the outcome of the 2020 election remains front and center for investors, and it is important to understand how gold has behaved in the past, under different political party leadership, and how this may potentially further support gold heading into 2021.
Political Party & Performance: A Historical View
Although no two elections are the same, evaluating gold’s average performance during various political party leaderships may help guide and calibrate which factors are important for investors to consider as they look ahead. Generally, gold has posted positive returns when either political party — Republican or Democrat — sits in the White House. But the yellow metal has historically performed slightly better when a Democrat has been in the Oval Office compared with a Republican — 11.2% vs. 10.2%, respectively. While gold appears to fare well regardless of party politics when it comes to the presidency, this does not appear to be the case for the US Congress (see Figure 1).