2012-11-07 09:14:16Roosevelt

Gold Firms on Election Day

Election day...at last. An end to the incessant political ads and robo-calls. So whatever the outcome, at least we have that to look forward to...


Perhaps we will have some resolution in the gold market as well. While the yellow metal has been edging higher in the wake of Friday's sharp losses, it remains to be seen if today's election will be the catalyst to push the market one way or another. UBS analyst Edel Tully says, “An Obama win would be the best-case scenario for gold, both from its implications for both monetary and fiscal policy.” Tully seems to believe that a reelection of President Obama essentially assures 'more of the same': More expansive monetary policy. More deficit spending and greater debt.


Conversely, “If Romney wins, we expect gold’s knee-jerk reaction to be negative, and we look towards $1,647 for initial support, the Aug. 31 low, with the potential for a deeper follow-through,” says Tully. Presumably, a Romney win would signal that Ben Bernanke's days as the Fed chief are numbered, although he reportedly may not seek reappointment no matter who wins today. Yet, given the state of the economy, Romney would be very unlikely to appoint a monetary hawk to run the Fed.


Not to beat a dead horse, but the President has very little influence on the operations of the central bank, beyond appointing someone to run it with a particular bias. As for fiscal matters, that is the realm of Congress. And Congress is expected to remain divided.


On inauguration day in January, whomever takes the oath of office of the President of the United Sates, they will still be faced with a moribund economy, stubbornly high unemployment and a debt load near the $16.4 trillion limit. Europe will remain mired in its own debt crisis, that continues to threaten the very foundations of the EU. Countries around the world will continue to head the siren-song of competitive currency devaluation, in the hopes of an export edge that will reinvigorate flagging economies. This will in turn continue to prompt reserve diversification out of these debased currencies and into hard assets.


These are the reasons to own and to buy gold...not who will sit in the Oval Office for the next four years.