Gold and Silver Volatility Amps Up on Election Jitters

Precious metals markets enter trading for the month of November, with volatility ramping up.

Gold hit a record $2,800 an ounce on Wednesday. But on Halloween, investors got spooked. They fled from the stock market, triggering a 1.9% drop in the S&P 500.  Gold also fell 1.9% on the day.

Metals markets, as well as financial markets, could see heightened volatility next week. Not only will there be a hotly contested election, but the Federal Reserve will make a decision on interest rates as well.

The Fed is widely expected to reduce its benchmark Funds rate by a quarter point.   If policymakers strike a dovish tone and telegraph more easing ahead, the recently strong U.S. Dollar Index could reverse to the downside.

As for the election, Wall Street has been pricing in about a 60% chance of a Donald Trump victory. But stock market bulls are just hoping for a clean outcome that doesn’t entail challenges, recounts, court battles, or social unrest in the streets.

Many Americans are stressed out about the election, thanks in part to the constant media deluge of inflammatory rhetoric.  Some literally believe Donald Trump is a fascist. Others believe the country will be lost if Kamala Harris wins.

The stakes are high, of course.  But some things will stay the same regardless of who wins.  For one, the trajectory of federal finances will continue to dig the country deeper into debt as the next President of the United States assumes office in January.

In these times of political and economic uncertainty, investors can achieve a measure of financial stability and security by staying well diversified. It would be a mistake to make rash portfolio decisions based on the election result.  Gold and silver prices may gyrate over the next few days, but the longer-term trends of currency debasement and supply deficits will remain in force regardless of what voters decide at the polls.

We certainly urge precious metals investors to make their voices heard on Election Day.  And when it comes to your vote mattering, it may matter more in state and local races.

Sound money policies have been advancing at the state level in recent years. Several states have moved to eliminate sales taxes on bullion transactions. These include New Jersey and Wisconsin.

Alabama and Nebraska have recently abolished income taxes on gains from precious metals, thanks again to efforts by Money Metals and its customers and grassroots activists. Nebraska has also included provisions to protect citizens of the Cornhusker State from being forced to use Central Bank Digital Currency.

Tennessee and Utah have authorized their treasurers to invest in physical gold. Doing so will help stabilize state finances and provide a measure of independence from federal finances.

But there is more work to be done.

In those states that still impose sales taxes or income taxes on precious metals, sound money advocates hope to find more allies in legislatures and governor’s mansions who will support repealing taxes and lifting other restrictions on the use of gold and silver as money.

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