With President-elect Joe Biden ready to assume the Oval Office, many people speculate what impact a new presidency might have on precious metals prices. The price of gold has been rapidly rising over the past couple of years and breaking records, and could be heading for its best year since 2010. Will this pattern continue?
I take questions like these very seriously. I have spent considerable time researching a range of factors and possibilities to gain a complete understanding of the situation. After careful analysis of several key factors, I have my answer.
Gold and other precious metals could continue to thrive under a Biden presidency. In fact, they could be even stronger than before.
While there are several factors that indicate this trend, the one that stands out to me the most is Biden’s Cabinet selections.
On November 29, 2020 The Wall Street Journal characterized the members of Biden’s economic team of having “played down concerns about budget deficits, which have reached record levels over the past year, arguing that now isn’t the time for policymakers to worry about rising deficits and debt.” Most notable is Biden’s Treasury Secretary nominee Janet Yellen.
Yellen, formally the Chair of the Federal Reserve, has been a huge advocate for monetary spending. She has been an aggressive champion of congressional stimulus, telling The Wall Street Journal, “The economy needs the spending” in an interview on September 28, 2020. Given her track record and monetary policy views, we can expect to see massive increases in government spending to continue in 2021. This could be very important for safe havens such as gold and silver.
Continued Federal Reserve money-printing and “big government” could increase major debt problems.
The current economy may be too reliant on congressional support and the Federal Reserve. Dion Rabouin, the markets editor of Axios, wrote on December 3, 2020, “The Fed-driven economy relies on the creation of trillions of dollars—literally out of thin air—that are used to purchase bonds and push money into a pandemic-ravaged economy that has long been dependent on free cash and is only growing more addicted.” In addition, Congress has spent trillions on various stimulus efforts.
This has grown government debt to massive levels. The deficit for the October–November period (the start of the 2021 fiscal year) was $429.3 billion according to the Treasury Department. The Associated Press reported that this is up 25% from last year’s October–November deficit, $343.3 billion. With Biden’s stimulus-minded Cabinet selections, debt troubles could continue to worsen.
Concern over the massive size of federal debt has led some financiers to move into gold. Leon Cooperman, the billionaire chairman and CEO of Omega Advisors, said in an interview in late 2020, “I bought gold for the first time in my life a week ago. I understand the case for gold. We’re on the way to some banana republic situation. Nobody’s worrying about the debt that’s being created.”
Hand in hand with debt are the problems the dollar is facing.
On Thursday, December 17, 2020 Fox Business wrote, “The U.S. dollar on Thursday plunged to a more than 2.5-year low against a basket of its peers after the Federal Reserve pledged to keep interest rates low until the economy shows signs of a sustainable recovery.” A combination of sustained near-zero interest rates and rising debt could send the dollar on a further downward trajectory. In response to this, precious metals such as gold could be set to rise in price over the next few years.
With growing debt, a weakening dollar, and government officials who are spending-oriented ready to take power, precious metals could be set to gain as a safe-haven hedge for everyone concerned about their portfolio in a new era.