2012 election

How the US Election Effects Where Gold is Trading At

Election cycles impact the price that gold is trading at in response to an artificially stronger economy that is often stimulated for the purpose of swaying an election. When the economic news is favorable, the dollar gets stronger and gold prices stop rising.

 

Elections are won and lost based on economic news. An incumbent’s political future is particularly vulnerable to economic news. People tend to vote with their pocketbooks. For this reason, it is not surprising that allegations of market manipulation for political gain are common.

 

Predictable Election Year Price Volatility Effects Gold Trade

 

History does repeat itself. The election years of 2004, 2008 and 2012 were all marked by a drop in gold prices just prior to the election. Since gold prices drop when the economy is perceived to be improving, this price move is a predictable consequence of political maneuvers designed to shed a favorable light on an incumbent President by intervening in markets for political purposes.

 

In the 1933 election when Roosevelt was running for re-election, it is widely believed that market manipulation played a role in his winning. Historians report that the public was led to believe that the economy was in better shape than it was at the time. Many politicians are comparing the 1933 election to the current 2012 election based on perceived market manipulations designed to prop up an ailing economy.

 

Federal Reserve Announcements and Impact on 2012 Economy

 

The timing of the Federal Reserve’s bold stimulus package announcement just 54 days before the Presidential election has caused many Republican opponents of President Obama’s to cry foul. In an effort to boost the housing market, The Federal Reserve will buy $40 billion every month in mortgage-backed securities. Additionally, the Federal Reserve has pledged a commitment to keep short-term interest rates at low rates close to zero.

 

Commodity traders expect gold prices to remain artificially low in response to the stimulus package announcements. Prices are expected to rise in 2013 after the election. For this reason many investors are buying gold before the election in anticipation of rising prices once the election is over and the economy returns to pre-election status. Since September, 2012, gold has been trading at lower prices, dropping by as much as $300 from peak prices as high as $1900 per ounce.

 

Factors that Impact Gold Prices

 

Like the stock market, the gold market is sensitive to politics and economic indicators. Several factors influence gold prices. Considered a safe haven for investors when national debt figures are high, gold is a safe bet. News about high inflation, high unemployment and runaway deficit spending push gold prices up.

 

Speculators decide which candidates they believe will have a positive influence on the economy. Many investors believe that the 2012 Presidential election results won’t significantly impact the price gold is trading at in the near future since the world economy is in such bad shape. Many investors predict it will take some hard and unpopular political decisions introduced over several years to start getting the runaway national debt under control.

 

Conclusion

 

Gold becomes much more attractive during poor economic times. Still considered to be the commodity of choice to offset inflation and declining currency values, gold pricing is tied to elections in a couple of different ways. Since gold pricing is sensitive to changing market conditions, and election years tend to show improving economic figures, gold has a history of showing flattened pricing in the months prior to the election. Some speculators also correlate gold pricing with a particular political party, expecting the economy to do better or worse with a particular elected official, which would immediately influence gold prices.

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