Gold Price Analysis: XAU/USD has three ways to go in response to the 2020 Presidential Elections


  • Gold prices heavily depend on the fate of fiscal stimulus. 
  • A blue wave could unleash a golden age for the precious metal.
  • If Trump remains is reelected, the reaction could be mixed.
  • President Biden with a Republican Senate would cause a meltdown.

Gold could power up if the government prints more money – that is the simple logic that has been rocking the precious metal in recent months. XAU/USD soared to new highs as central banks enhanced their bond-buying programs and as authorities used the funds to shore up the economies amid the coronavirus crisis. 

The Federal Reserve, the European Central Bank, and even European governments did "whatever it takes." The US government also played its part early in the crisis with the CARES Act – but most programs have lapsed. Now, markets and gold bulls want more of what Uncle Sam can give.

Democrats and Republicans seemed to hover around a $2 trillion deal but failed to reach an accord ahead of the elections. A decision on more funds – of which some will likely fuel into gold – will wait for the new administration. 

There are three main election scenarios that would all yield distinct results for XAU/USD:

1) Blue wave – Golden wave

President Donald Trump is trailing rival Joe Biden in national and state polls. According to FiveThirtyEight, he has an 88% chance of winning at the time of writing. Democrats have around 70% probability of winning the House and the Senate. 

Source: FiveThirtyEight

In this "blue wave" scenario – which is the likeliest according to the polls – Dems could approve a bill worth $2 trillion as they nearly agreed with Republicans, or even $3.4 trillion as they originally wanted to do back in May.

For the yellow metal, the more the merrier. A break above the all-time highs cannot be ruled out in this scenario.

2) Trump reelected – a mixed reaction

Many still remember 2016 and claim that polls are missing the "shy Trump voter" and that he can still win the electoral college. While surveyors probably fixed some of their problems, there is still a chance that the president squeezes another victory. In that case, Republicans are also likely to cling onto the Senate.

See 2020 US Election: Polling, history and the submerged Trump vote

In this scenario, Trump may feel he has the mandate to impose his will on Republicans –something he struggled with toward the elections – and a stimulus package is likely even during the "lame duck" period.

Gold bulls would likely cheer such a scenario, but any rally would be short-lived, as the total package will probably be smaller than a "blue" one. 

3) President Biden, Republican control – meltdown scenario

As mentioned above, the chances for Biden to oust Trump are higher than for Dems to beat the GOP in the race for the Senate. If Republicans cling onto the upper chamber, they would probably limit any large package. 

Source: FiveThirtyEight 

Gold could suffer in response to partisan brinkmanship – especially if the relief deal falls short of the $1 trillion mark. A significant retreat toward pre-pandemic levels is an option as well. Negotiations could be protracted. 

Conclusion

Gold heavily depends on stimulus, and the more, the merrier. The optimal scenario is a clean Democratic sweep, followed by a Trump victory. A split between President Trump and the Senate is the worst outcome. 

More: 2020 Elections: Seven reasons why this is not 2016, time to focus on the Senate

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Recommended Content


Recommended Content

Editors’ Picks

GBP/USD drops to 1.2400 area after BoE cut, US data

GBP/USD drops to 1.2400 area after BoE cut, US data

GBP/USD trades deep in negative territory near 1.2400 on Thursday. Although the disappointing US data help the pair limit its losses, it struggles to gather recovery momentum following the Bank of England's decision to cut the policy rate by 25 bps.

GBP/USD News
EUR/USD stays below 1.0400 despite weak US data

EUR/USD stays below 1.0400 despite weak US data

EUR/USD stays on the back foot below 1.0400 in the second half of the day on Thursday. The cautious market stance supports the USD and doesn't allow the pair to gain traction, even after the data from the US showed that weekly Initial Jobless Claims rose to 219,000.

EUR/USD News
Gold alternates gains with losses below $2,870

Gold alternates gains with losses below $2,870

Gold keeps its inconclusive price action below the $2,870 region per ounce troy on Thursday against the backdrop of a marked recovery in the Greenback and a mild rebound in US yields across the curve. Investors refrain from taking large positions ahead of Friday's key US jobs data.

Gold News
The BoE: A meeting of contradictions

The BoE: A meeting of contradictions

The Bank of England delivered a rate cut as expected on Thursday, however, it was the commentary that followed along with the BOE’s updated forecasts for growth and inflation that shocked investors, and the initial reaction to the report was dovish.

Read more
Top Trumps: The global economy’s House of Cards

Top Trumps: The global economy’s House of Cards

The year has barely started and we are learning the hard way what Donald Trump’s second term in office means for markets, analysts and global policymakers. It's like living through an episode of the political thriller, House of Cards.

Read more
The Best Brokers of the Year

The Best Brokers of the Year

SPONSORED Explore top-quality choices worldwide and locally. Compare key features like spreads, leverage, and platforms. Find the right broker for your needs, whether trading CFDs, Forex pairs like EUR/USD, or commodities like Gold.

Read More

Majors

Cryptocurrencies

Signatures

Best Brokers of 2025