When it comes to the gold market, one discernible pattern we’ve seen is that the yellow metal has shown gains over the entire election year not just during the campaign itself, starting with sharp gains in January:
January 2008 10.9%
January 2012 11.0%
January 2016 5.3%
Interestingly, the January following the election is also often a good month for gold:
January 2009: 5.3%
January 2017: 5.2%
So, with this in mind, how likely is it we’ll see a repeat performance with the 2020 US election? With gold price up more than 30% so far this year, there’s every chance it will continue to rise between now and the end of January. Of course, any predictions regarding US presidential election cycles are based on a small sample size.
Another factor to keep in mind is the effect of COVID-19 on global markets. Gains in gold prices this year and through to January 2021 could be reflective of the severe economic conditions and unprecedented amount of monetary and fiscal stimulus, rather than the presidential cycle, as the metal is a safe-haven asset and inflation hedge. Still, it’s certainly useful to look at historical trends and identify patterns that could repeat themselves.
The chart below indicates that historically, the post-election year is the worst performer, with gold prices experiencing average gains of just 2.27%. The second year of the presidency is the strongest for gold prices, with average gains of 12.82%; while the third year shows average gains of 11.2%. And finally, historical data suggests average gains of 8.9% during the election year itself.