How a Harris Win in the Election Could Affect Gold Prices
Written by
Laura Beck
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Levi Leidy
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As the 2024 U.S. presidential election approaches, investors and analysts are closely monitoring how a potential Kamala Harris victory could impact financial markets, particularly the price of gold. While numerous factors influence gold prices, significant political changes often create ripple effects throughout the economy.
Here’s how a Harris win in the election could affect gold prices.
Market Uncertainty
Matthew Jones, precious metals analyst at Solomon Global, said that any major political shift will have an effect on financial markets, just by introducing an element of uncertainty.
“Uncertainty often leads to volatility, and both are known to be big price drivers for gold,” he said.
Jones noted that Harris’ proposed policies could lead to changes in government spending and regulatory approaches. Harris supports increased government spending on social programs, as well as infrastructure and climate initiatives.
“Such expenditure could lead to higher budget deficits, which might weaken the dollar and increase inflation expectations,” said Jones.
In this scenario, investors have historically turned to gold as a hedge against inflation. If they do, the increased demand could push up gold prices. “When inflation hits, gold becomes the go-to, the one thing investors cling to for safety,” offered David Materazzi, CEO at Galileo FX.
Tax Policy
“A few of her ideas include raising the corporate tax from 21% to 28%, raising the income tax level for earners over $400,000 to 39.6%, taxing LTCG (long-term capital gains) as ordinary income for individuals with taxable income over $1 million along with a 25% unrealized gains tax on the ultra-wealthy,” said Anthony DeLuca, CFP and expert with Annuity.org.
These policies, which could bring positive outcomes, could potentially have some unintended consequences, said DeLuca.
“All the above will result in is raised cost of goods which will be passed down to the consumer, more government spending which will devalue the dollar and raise our already out-of-control government debt issue and keep business owners from expanding,” he said.
Increased Demand for Gold
Political shifts can trigger changes in investor behavior.
“Whenever a Democratic president gets elected, conservatives around the nation start sounding the armageddon alarm and declaring the end of days,” said Brandon Thor, CEO of Thor Metals Group. He also said that conservatives make up a significant portion of gold buyers, which could lead to increased demand for gold as a safe haven asset.
“Her financial transaction tax would make Wall Street unstable, and when that happens, people turn to gold,” said Materazzi.
Federal Reserve Policy and Interest Rates
“As interest rates fall, investors will look towards different avenues for portfolio growth,” said DeLuca. “This includes gold.”
He added that regardless of who wins the election, the Federal Reserve is expected to begin lowering interest rates, which could be favorable for gold prices.
“My biggest concern with a Vice President Harris win is her economic stance,” said DeLuca. “At a time where we need inflation to remain level for the Federal Reserve Board to cut the federal funds rate starting in September and through 2025, raising taxes and more government spending is not the answer,” said DeLuca.
This could be a delicate balancing act for Harris to navigate.
Economic Inheritance
Experts generally agree that a Harris victory could mean higher gold prices, if the conditions are right.
They also emphasize that the actual outcome will depend on a complicated set of factors. Not all of these factors would be under the control of Harris’ administration, such as the global economy or the economy inherited by her administration from the previous one.
“Regardless of who becomes president, he/she will inherit an absolute ticking time bomb of a market with the second hand about to hit 12,” Thor said.
But predicting market movements is never an exact science.
“A Harris win could lead to a gold price increase, primarily due to anticipated government spending, inflation concerns, market volatility and potential regulatory changes,” said Jones. “However, the exact impact would depend on the specifics of her policies and how they are received by markets and investors,” he concluded.
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