Americans will vote in the midterm elections next Tuesday. The latest polling suggests that a “red wave” is building, and Republicans may win the majority both in the House and the Senate. The election results will have implications for all markets – and that includes precious metals.

Mass psychology is one factor. Confidence in U.S. institutions has been in decline for several decades. However, when we see a marginal restoration of confidence, it can impact physical market demand for bullion.

Accordingly, should Republicans win big next week, red-hot bullion demand could cool off for a period of time.

If the red wave fails to materialize, however, that could be viewed as confirmation the country will continue barreling down the wrong track. In that event, it is safe to say bullion investors will be inclined to keep stacking gold and silver more than ever.

It is less certain as to exactly how much confidence they will get from a Republican Congress. It's all about expectations and whether politicians immediately start walking the talk.

There are some things a new Congress can do. One of the first battles will be over the federal budget and the debt ceiling. Americans will find out pretty quickly whether enough genuine conservatives are in position to actually hold the line on deficits and debt.

Balancing the U.S. budget involves making some very hard choices. That is why most politicians have viewed taking a hardline position on the budget as political suicide.

Goldbugs must also temper their expectations based on what Congress cannot do. Major legislative reforms would have to wait for a president who is oriented toward sound money principles. Overriding a presidential veto requires two-thirds vote in both houses, and nobody is expecting a red wave big enough to deliver such a margin.

Congress cannot do anything about the $31 trillion in debt already on the books or the mushrooming interest payments associated with that debt.

Interest rates are just one of a whole universe of market drivers outside the purview of Congress.

Politicians here also can’t control problems developing elsewhere in the world.

They won’t decide whether Russia escalates the war in Ukraine, or if there is a currency crisis in the UK. They cannot prevent a black swan type event in financial markets, such as the failure of Deutsche Bank or Credit Suisse.

Next week’s election is bound to impact the metals markets.

Should Republicans win big, investors may expect that a degree of fiscal discipline would be restored, and that inflation will come down. That could mean a temporary slowdown in demand for coins, rounds, and bars.

However, any sky-high expectations for the new Congress are unlikely to be met.

Money Metals Exchange and its staff do not act as personal investment advisors for any specific individual. Nor do we advocate the purchase or sale of any regulated security listed on any exchange for any specific individual. Readers and customers should be aware that, although our track record is excellent, investment markets have inherent risks and there can be no guarantee of future profits. Likewise, our past performance does not assure the same future. You are responsible for your investment decisions, and they should be made in consultation with your own advisors. By purchasing through Money Metals, you understand our company not responsible for any losses caused by your investment decisions, nor do we have any claim to any market gains you may enjoy. This Website is provided “as is,” and Money Metals disclaims all warranties (express or implied) and any and all responsibility or liability for the accuracy, legality, reliability, or availability of any content on the Website.

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