Trump vs. Harris Potential Impact on Gold

As the US presidential election approaches, the impact of the "Trump Trade" is questioned with the rise of a new nominee.

The Trump Trade Boost

For some time since the election campaign began, traders have been contemplating how to appropriately position themselves ahead of a potential victory for former President Donald Trump in what has become known as the "Trump trade." Interest in this strategy significantly increased a few weeks ago following an assassination attempt against the former president, which saw analysts raise their estimates for his chances of winning the race.

Following new polling conducted during and after the Republican National Convention (RNC), the decline in numbers favourable to President and candidate for reelection Joe Biden was sufficient that it was viewed as one of the primary motivations for him to step aside and endorse his running mate, Vice President Kamala Harris. This new development has again altered expectations for the election's outcome, with some suggesting that she polls somewhat better than her current leader and a fading interest in the "Trump trade".

Potential Outlook Impact

The shifting polls have left investors considering sectors that may benefit from either a Trump or Harris presidency. Traders generally agree that President Trump's proposed tariffs and tax cuts aim to widen the deficit, supporting higher interest rates and a stronger dollar. His tariffs would also likely advantage domestic producers over large international businesses. Small-cap stocks tend to see gains under President Trump's policies, aiding the Russell 2000 index.

A Harris administration is viewed as continuing present strategies with "blue" support for technology and international trade. This gives Nasdaq a minor benefit, especially larger stocks able to fund initiatives advancing green energy. One issue is that by 2025, the Trump-era tax reductions are expected to expire, presumably raising government income and reducing the deficit gap at the cost of slower economic growth. The combined effects would back expectations of lower interest rates and a weaker dollar.

While gold would logically profit from lower rates and uncertainty around the eventual winner, it could also see gains should a Trump administration intensify trade conflicts and slow international trade through protectionism. President Trump's noted unpredictability may also prompt investors to stay closer to gold's relative safety.

Gold Pulling Back

Gold prices recently achieved the measured-move target following a triangle breakout, having retreated slightly before hitting regional resistance at $2500 per ounce. Maintaining prices above the breakout line at $2340 per ounce could open the door to reaching the 138.2% and 161.8% reverse Fibonaccis of the $2280-$2450 leg at $2515 and $2555 per ounce and eventually towards $2750 per ounce. Alternatively, $2150 forms a solid floor ahead of a possible decline to the $2000 per ounce mark.

Source: SpreadEx / Gold Spot

Key Takeaways

As the US presidential election approaches, support for incumbent President Biden led to his endorsement of Harris as the party's candidate. This has altered expectations of the election's outcome and diminished interest in positioning for potential gains from a Trump victory. Investors now consider how different policy agendas under Trump or Harris might affect sectors like technology, trade and green energy. A Trump presidency could support tariffs, tax cuts and small caps while benefiting gold, whereas Harris is seen as continuing current strategies with support for tech and international trade.