US Election:
Historical performance of gold in previous elections

Why does gold matter?

As the most famous safe haven security, gold is one of the most heavily- traded assets worldwide. When it comes to political risk in the United States, gold has an even more important role to play, since the other global safe haven assets – the US dollar and US treasuries – are exposed to weakness in the US economy or political instability. That makes gold, alongside a small number of other assets such as the Euro, the natural choice for investors worried about political risk in the US.

“Because gold trends on long-term cycles, understanding this market requires a longer-term view than for stocks or bonds”

Gold performance in election years

At first glance, gold prices don’t follow a regular pattern during election years. Trends in the bullion market are normally long-term and follow their own internal logic. For example, the strong bull market from 2005 to 2012 was followed by slight declines and a flat, sideways trading market until 2019, when the bull run began again, driving gold to all-time highs. This vaguely matches the dates of the US presidential elections, but the link is superficial and driven more by underlying market factors than political risk. Even so, gold experienced an exceptional rally throughout the Democratic presidency of Barack Obama and began one again shortly before Joe Biden came to power in 2020.

Correlation is not causation, but it is possible to observe a tendency for gold to increase in price when Democrats control the White House. The twenty-first century has generally been good for gold, and we would need to go back to the 1980s to find a sustained bear market in the precious metal.

Historical gold performance

Gold has been at the heart of the global financial system for centuries,  and we have price data for the entire history of the USA. Looking at the past, gold markets have experienced volatility around key elections, and traders concerned about political risk will often buy gold to hedge their stock and bond exposure. Because gold trends on long term cycles, understanding this market requires a longer-term view than for stocks or bonds, since major historical events are a key driver of gold prices. The most important of these took place in the 1970s, when the gold standard broke apart.

Nixon and Carter: the end of the gold standard

Democrat Jimmy Carter’s presidency was the first after the end of the gold standard in the US. In 1971, Carter’s Republican predecessor Richard Nixon launched his New Economic Policy, which marked the beginning of the end for the Bretton Woods system. The changes Nixon implemented turned the US dollar from a gold-backed to a fiat currency, and Carter’s presidency was marked by sustained price increases, with a 326% increase from his first day in office to his last. As well as the end of the gold standard, the 1970s saw geopolitical tensions between the Soviet Union and the United States, and the start of economic problems in America’s industrial cities.

Reagan and Bush Senior: gold loses steam

Under Republican president Ronald Reagan (1980 to 1988) gold markets cooled off as US equities soared. From the first to the last day of Reagan’s presidency, gold lost 26% of its value. This took place in the context of a general risk-on environment, with investors moving into more volatile assets such as equities and corporate debt. Despite equity market wobbles at the end of the decade, Bush Senior’s presidency (1989 –to1993) saw flat gold prices.

Clinton and Bush Junior: a slow start

Throughout the 1993 to 2001 presidency of Bill Clinton, gold mostly traded sideways. The US benefited from a healthy overall economy and markets enjoyed a risk on environment, with the bursting of the ‘tech bubble’ in the early 2000s producing only short-term volatility. The contested 2000 election, where lawyers had to argue over the vote count in Florida to decide the overall winner, produced brief spikes of volatility, but the overall market remained flat until the final years of Bush’s presidency.

Obama and the financial crisis

Gold’s most impressive bull run took place from about 2005 until 2012, and it coincides with the presidency of Barack Obama. Obama’s election victories were both risk off events. Investors rotated out of stocks and into government bonds, the US dollar, and gold. This rotation was partly driven by the policies of the Democratic president, including financial regulation and increased taxes, and partly a response to the global financial crisis. Towards the end of Obama’s presidency and heading into Donald Trump’s, gold markets cooled off, before beginning a new and ongoing bull run in 2019.

Trump vs Harris: what does it mean for gold?

Looking back at past elections we can see a general pattern, of stable or declining gold prices during Republican presidencies, and increases under the Democrats. This is an observation, not a rule, and it is never as simple as saying Harris is good for gold or Trump bad. To understand market reactions you need to look at all the contributing factors: geopolitics, economic performance, trade, GDP growth, and technical market movements. Political risk adds uncertainty to markets, and can also fuel existing trends, pushing them further than they would otherwise go. Gold traders and gold CFD traders need to look at technical factors and the prevailing trend before they come to an opinion on gold’s future trajectory, bearing in mind the historical impact of both Republicans and Democrats on the price of the yellow metal.

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