The impact of the US presidential election on the price of gold
Both Kamala Harris and Donald Trump are proposing policies that could weaken the US dollar and boost gold. While their approaches differ, the overall trend points to a continued weakening of the dollar and a rise in gold prices over the next 12 months.
Kamala Harris: fiscal policy and energy
Kamala Harris advocates raising taxes on the wealthy, including a tax on capital gains and unrealised income. This could reduce investment and slow economic growth, weakening the dollar. These measures would also complicate the tax code, placing additional burdens on businesses and government resources.
Taxes often change behavior. History shows that taxes on wealth lead to capital flight and lower government revenues. While such initiatives may be popular with voters, their negative impact on the economy is clear. The higher the taxes on the wealthy, the greater the likelihood of capital flight.
In addition, Harris supports increased spending on renewable energy, which could make it more difficult to obtain permits for oil and gas extraction. This could lead to higher energy prices, increasing the risk of energy shortages and weakening the US economy.
Trump: Taxes and tariffs
In contrast, Donald Trump promises to cut taxes, which could theoretically boost the economy. However, the lack of plans to cut government spending would lead to an increase in the national debt. Higher interest rates to service the debt would have a negative impact on the economy and the dollar.
Another key aspect of Trump's policy is the introduction of tariffs on imports. Trump is proposing high tariffs on Chinese goods and threatening tariffs on other countries. This could drive up the cost of imported goods, raising the cost of living in the US and worsening international trade relations.
The imposition of tariffs would also lead to retaliation from other countries, reducing exports and profits for US companies and further isolating the US economy on the global stage.
Overall impact on the dollar and gold
Both candidates' policies are likely to weaken the dollar. For Harris, this would be through higher taxes and increased government spending, while for Trump it would be through tariffs and trade wars. As a result, we are likely to see increased safe-haven demand for gold, pushing up its price.
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