The US election is getting closer – and causing increasing nervousness on the stock market. How the election will turn out is just as open as the question of whether US President Trump will accept the result. The USA could therefore face a time of chaos, which should also weigh on the stock market. However, stocks of gold miners should benefit from any election result, says an expert.
?? Paul Gambles sees gold mining stocks as the winner of the US election
?? The gold price is currently above the mine operators’ production costs
?? Several experts expect further price gains in gold in the context of the US election
Starinvestor Warren Buffett caused a bang this year when it became known that he had shares in the Canadian gold miner Barrick Gold in his depot – although he did Gold previously repeated as “lazy” and “useless” and had avoided investments in this area. But with this move the oracle of Omaha may have lived up to its name again. Because with a view to the upcoming US election, another expert advises investing in gold mining stocks like Barrick Gold. Because, in his opinion, they are in a win-win situation.
Paul Gambles: Gold mining stocks definitely benefit
For Paul Gambles, managing director and co-founder of the investment consultancy MBMG Group, gold mining stocks are currently one of the best investments on the market, as they would be in a good position regardless of the outcome of the election for the office of US president. “We think they would benefit from a stimulus package, but we also believe that they would benefit from the chaos of the US presidential election,” Gambles said on CNBC’s “Squawk Box Europe”. This is why his company recently bought gold mining shares and wants to hold them “until well after the election”.
According to “CNBC”, there are essentially three scenarios for the US election, all of which are positive for the gold price and thus also for gold mining shares: Should Trump win and the Democrats continue to have a majority in the House of Representatives, whose MPs also on If November 3rd are elected, then negotiations on an economic stimulus package should continue. Should Biden win, there will also be a stimulus package, but it should be bigger. In any case, the US government – in addition to the Fed – is likely to provide liquidity and thereby fuel concerns about rising inflation, from which gold would benefit as a stable investment. The third scenario named by “CNBC” assumes that there will be a head-to-head race between Trump and Biden. In that case it would be possible for Trump to carry out his threats and questions the election result on the pretext of possible election fraud. The result would be a protracted dispute that would land in the United States Supreme Court, creating significant volatility and downward pressure on risky assets. Even in this scenario, gold, as a safe haven, would benefit from the chaos to be expected. And when gold benefits, gold mining stocks also benefit as a rule.
Rising gold prices help gold mining stocks
At the beginning of August the gold price fell in view of the ongoing economic uncertainties, the weak US dollar and the low interest rate level marked a new all-time high at $ 2,063.68. As a result, gold mining stocks also climbed significantly: Barrick Gold’s paper reached a multi-year high in August, as did that VanEck Vectors Gold Miners ETF, in which the shares of several large gold miners are bundled. There are currently numerous uncertainties that could further drive the gold price: In addition to the US election, low interest rates and inflation concerns, the corona pandemic with rising case numbers continues to cause uncertainty, as does the dispute between China and the USA continues to smolder – although it has recently moved into the background. The gold price is therefore still at a very high level – even if it has come back a little from its record high and is again below the mark of $ 2,000. Michael Cuggino, Portfolio Manager at Permanent Portfolio Family of Funds, however, gives hope for further price gains. Gold will “increase in value in the long term, no matter how the election goes,” he told Bloomberg.
For gold miners, however, the current level of the gold price is already very lucrative. According to “Euro am Sonntag”, the mine operators have actively reduced their production costs in recent years and are now also benefiting from lower energy prices, which make up a large part of their costs. So you can currently produce quite cheaply – so cheaply that the price of gold currently exceeds their production costs. Any further increase in the price of gold would widen this gap in favor of the mining companies.
Other experts expect increasing demand for gold
The chances that the gold price will continue to rise – and possibly even exceed its previous record high – are very good, according to several experts. According to “Bloomberg”, for example, market strategists from State Street Global Advisors and Invesco fear a protracted battle for the election result, from which gold should benefit as a safe haven. “Despite some polls suggesting that Biden is expanding his lead, I would not assume that the risk of contesting the choice has been made, although I know that is what many believe,” said Invesco strategist Kristina Hooper to the US news site. “A lot can happen between now and the election, and I believe gold can benefit from it,” said Hooper. George Milling Stanley of State Street Global Advisors also sees price potential for gold: “Gold thrives on uncertainty: In my experience, we have never had an election in the US that was as uncertain as this, and never before a political environment that was like this is unsafe like this, “he told Bloomberg.”
Even analysts of the Citigroup assume, according to “Bloomberg”, that the precious metals market may underestimate the risks and concerns surrounding the US election. In their opinion, however, these could lead to the gold price rising to a new record high by the end of the year – which in turn should benefit mine operators and their stocks