Having won the US election, Joe Biden will become the 46th president of the United States on Wednesday 20th January 2021. But with Biden’s new policies, and the handover of power looking like it may not be a smooth one, how could the new presidency affect the gold market?
Is Biden Good for Business?
Joe Biden will take over the presidency at a very difficult time in history. The global covid-19 pandemic has forced governments around the globe to pump money into their economies, and national divisions and civil unrest have plagued many parts of the US. Meanwhile, outgoing President Donald Trump has announced his refusal to attend the inauguration, and last week became the first President in history to be impeached twice after inciting violent protests at Capitol Hill due to his defiance to concede the election result.
Biden has stated he will be making the pandemic a top priority, and has announced a $1.9tn rescue package, which although extremely costly, may go some way to restore some faith in the US government. In addition, we may see Biden make good on his campaign promises to increase corporation tax to 28%, up from the 21% that it was cut to during Donald Trump’s tax overhaul, as well as impose a 15% tax on the income of companies who make more than $100 million. Biden has also promised to improve workers rights, meaning a possible minimum wage increase, which would also increase businesses’ costs.
Of course, these tighter restrictions, as well as higher taxes, will have a large effect on businesses, and ultimately, an effect on the investment markets.
Is Biden Good for Gold?
Historically, a democratic government usually leans towards higher taxes, which ultimately leads to a knock-on effect to the investment markets, prompting a rise in the gold price.
Also, if Biden goes ahead and disposes of Trump’s import and export regulations and tariffs, this could see a significant fall in the US Dollar. And as we know, as the dollar falls, we usually see the gold price rise. Biden’s spending plans will dump the US into heavy debt too, which would most likely see the dollar pushed lower. The chance of a swift recovery from the damage done to the economy due to the pandemic is extremely low, which could see gold gain over the next few months and years.
As we stated above, Joe Biden has inherited an extremely tough legacy. Rarely has a presidency begun in such tough political and economic circumstances, and the challenges he faces are unprecedented. Investors will be watching closely, considering his policies and how it may affect their investments. It’s this uncertainty that may drive gold higher, because as we know - instability breeds a search for safety, and in the end, that safe haven of precious metals.
This blog represents one person’s opinion only. Customers should conduct their own research and take advice before making an investment. We do not offer investment advice.