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The prevailing
wisdom is that a Romney presidency would be viewed as gold negative and that
a second Obama terms would be seen as gold positive. However, the history of
post-election years since 1971 suggests that the gold market is decidedly
indifferent, or apolitical, if you will, about the outcome of presidential
elections.
Here is a rundown
gold’s performance in post-election years:
1973………+73%
(Republican victory)
1977………+21%
(Democrat victory)
1981………-32%
(Republican victory)
1985………+7%
(Republican victory)
1989………-3%
(Republican victory)
1993………+20%
(Democrat victory)
1997………-21%
(Democrat victory)
2001………
0% (Republican victory)
2005………
+20% (Republican victory)
2009………+24%
(Democrat victory)
Of the six
“up” years following an election, three occurred when the
Republicans won the White House and three when the Democrats triumphed. Of
the three “down” years, two occurred following a Republican
victory and one when the Democrats won. The average gain in the six
“up” years was 27.5%. The average loss in the three
“down” years was 18.6%.
The volatility of
post-election years in the gold market stands in stark contrast to the
relative equanimity of the gold market in pre-election years – a phenomena borne out by gold’s relatively quiet
performance thus far in 2012.
Here’s how
gold performed during election years:
1972……….+40%
1976……….-4%
1980………+5.4%
1984………
-11%
1988………
-15%
1992………-5%
1996………
-5%
2000………-3.5%
2004………
+3.5%
2008………
+3%
2012……..
+ 7% (thru October)
For those who insist
that a Romney victory would translate to a down year in 2013 for the gold
market, it might be important to note that since 1971 there have been two secular
bull markets in gold and both were launched during the presidential terms of
Republicans. The first came under Richard Nixon in 1973-74 and the second
under George Bush in 2002-2003.
Though it is
difficult to make a connection between gold’s post
election year performance and the politician who happens to be sitting
in the Oval Office, it would be a mistake to assume that politics
doesn’t play a role in the gold price. In short the policy matters not the political party
orchestrating it.
Congress
deliberately staggered the term of office for the Fed chairman to overlap
presidential elections by two years in order to keep the electoral effect on
monetary policy to a minimum. That means we are going to get two more years
of Ben Bernanke’s policies no matter who occupies the White House. The
“money helicopters” will take to the sky at the earliest sign of
trouble in the banking system or the economy in general. The
“technology” available to the government called “the
printing press” will be cranked up and fully engaged should the
unemployment rate return to pre-election year stickiness. Barring an unlikely
early resignation, the lame duck at the Federal Reserve might play a more
decisive role in next year’s gold market than the occupant of the White
House. As such, the historic volatility in the gold market that normally
follows an election year could very well work in the gold owner’s
behalf.
Michael Kosares
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***** For more information on the effect of
Tuesday’s election on the gold market, please visit our latest USAGOLD-TV RoundTable. (This posting is an extension of
arguments skillfully presented there.)
***** To keep up with the principle trends
impacting the gold market, we invite you to sign-up for our
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