Cavatoni: Put a six-month window on any election trades
World Gold Council strategist says election outcome will likely play a minimal effect on gold prices, but investors should consider a six-month window on political trades
World Council Council Senior Market Strategist Joe Cavatoni told Investing News Network Friday morning that gold prices will likely not have a strong reaction to the U.S. election outcome aside from some expected short-term volatility.
“Here’s how investors should think about gold and its response to the lead-up to the election and the election results,” he said. “Most of the rhetoric is going to be around what the possibilities could be on the back of a win from either candidate. A lot of that is being guessed and priced into the gold price, but the actual win itself has little or no impact on the price of gold in the short term.”
Expect volatility, but not strong directional moves
Cavatoni believes there could be increased levels of volatility due to investors looking to position around expected policy changes — and he said central bank behavior could also be influenced by the outcome of the election.
“(People will be) looking at what’s going to happen and how they will be impacted by the fiscal challenges the U.S. is facing,” he said.
But those changes are not likely to start taking shape for at least six months into a new presidential term, he said.
“ (That’s) when policies can be discussed, clarified and potentially start to be implemented and that’s why we think six months into the election outcome is where you will see more effect on the gold price than at the moment,” Cavatoni said.
Some changes are possibile, but not enough to move the needle
Cavatoni said a win by Kamala Harris could lead to higher bar and coin demand amid Republican fears of higher inflation or taxes, but noted demand could also drop on a Donald Trump victory.
But it’s not likely to change the price of gold in any significant manner.
“It’s not momentum or substantial enough in terms of its flow to impact the price dramatically,” he said.
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