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Best time to buy gold during election periods

IMG Auteur
Published : November 08th, 2012
795 words - Reading time : 1 - 3 minutes
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Other than the US nonfarm payrolls data release on Friday, when it comes to gold the markets have remained fairly cautious in the run up to the election in the past couple of weeks or so.

As we explained last week (when we looked at Obama and the gold price), how the result of the US election will affect the gold price is an interesting one. Whilst Democrats and second term presidents are shown to have a greater probability of driving up the gold price by a greater percentage than that seen by Republicans and first term Presidents, we were able to conclude that regardless of who made it into the White House, even if it was Martin Sheen himself, gold is going up.

But forgetting about the result, which is what everyone seems to be hanging on for, it might be worth looking at what normally happens to the gold price around elections – regardless of who or which party wins.

Gold price changes remain consistent day to day



Apart from President Carter who saw a significant change in the gold price both the day before and after his election, the percentage change in the gold price appears to remain relatively constant. The results of the analysis on percentage change in the gold price in the days around the election are the most consistent of all the graphs you will see here.

The average change in the gold price before the election is 0.21% and after the election 0.27%, therefore one could argue that the best time to buy gold is the day before in order to cash in on a gain of just over 0.5% per cent….not exactly something to get too excited about is it?

What the election weeks mean for gold prices




As we discussed in last week’s analysis, the gold price reacts best to Democratic victories and those who are embarking on their second term. The above shows the perfect demonstration of this. But it also shows that there is little consistency in the weeks surrounding the election – i.e. there is little to go on for deciding how to buy gold this week and next.

Gold investing in elections months

Once again, we can learn from first and second terms’ impacts on the gold price when looking at the months following an election. When the incumbent wins, the gold price is more likely to see a small percentage increase, if not a fall, than if a newbie were expected the following month.




Years surrounding the election and the gold price

On average we see a smaller increase in the gold price in the run up to the election; this corresponds brilliantly with this year, a year which seems to have the naysayers holding their pins ready to ‘pop’ that imaginary gold bubble.

This graph should come as a relief to those who chose to invest in gold in the last year, this price behaviour around an election seems to be relatively understandable. It should come as a reassurance to gold investors that gold has a tendency to continue to rise in the years preceding the next election, but a worry for those who invest in dollar-based assets.




Concluding thoughts on gold price changes

When we looked at the impact of tomorrow’s result on the gold price, last week, we decided that whilst it was interesting that a second term, Democrat President would be the best thing for the gold price for the short-term it was really nothing to judge your gold investment options on.

The fact of the matter is, whether it’s a Democrat, Republican, the day of, the year after or the month before, the money supply is still outpacing any relevant requirements. Governments remain inflationary.

Even if it’s Mitt Romney who wants everyone to look after themselves, he would still want to be re-elected come 2016. He won’t get in unless the job numbers go up (cue more spending) and people begin to see a change in their standard of living (cue more spending). This of course means more money which the country doesn’t have – and therefore will help the gold price.

As someone commented on our earlier article regarding the US election and the gold price, gold is going up no matter what, we should instead focus on which President will do the least damage to the rest of the country and its resources.

Want protection from debt and defaults? Buy gold online in minutes…

Please Note: Information published here is provided to aid your thinking and investment decisions, not lead them. You should independently decide the best place for your money, and any investment decision you make is done so at your own risk. Data included here within may already be out of date.

 

 

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Jan Skoyles is Head of Research at The Real Asset Company, a platform for secure and efficient gold investment. Jan first became interested in precious metals and sound money when she met Ned Naylor-Leyland whilst working alongside him in the summer of 2010. Jan then went on to write her undergraduate dissertation on the use of precious metals in the monetary system. After graduating from Aston University Jan joined The Real Asset Co research desk. Her work and views are now featured on a range of sites including Kitco, GATA and The Telegraph. She has appeared on news channels including Russia Today to discuss the gold price and gold investing. You can keep up with Jan's commentary by subscribing to our RSS feed Gold Investment News.
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