Gold prices are showing an affirmation under incoming President’s Joe Biden’s Government. Gold prices are seeing a rise in their prices as the new year has begun and now it is set to post a second straight weekly gain, as hopes for additional U.S. fiscal stimulus under Biden’s Presidentship.
But what’s next for the price of gold? What does a Biden presidency mean for the yellow metal?
America has elected a new President. It was a close race, but Joe Biden eventually won and he will be inaugurated and take office in the White House on January 20. The price of gold rose initially in the aftermath of the elections, only to plunge on the news regarding Pfizer’s vaccine breakthrough, as the chart below shows. This is what we know.
The current market is unstable and gold might see inflation. Commodities retreated from the most expensive in a year on the Bloomberg Index while longer-term US borrowing costs slipped from 10-month highs.
With Japan, Germany, the UK, and the US all showing new record daily deaths from Covid-19 this week, European shares showed their first weekly drop in five, trading almost 6% below January 2020's all-time high.
Calling again to more than double the minimum wage to $15 per ounce, Biden promised lower and middle-income taxpayers a gift of $1,400 in new Economic Impact Payments to offset the coronavirus pandemic and shutdowns, on top of the $600 stimulus checks already sent.
According to the official Biden-Harris Presidential Transition website, the new administration has cleared their attention towards four priorities: COVID-19, economic recovery, racial equity, and climate change.
Biden seems to be determined to beat the epidemic. He has acknowledged the challenge and promised to listen to science and health professionals, although it remains to be seen whether he will do so. Regardless, Biden has a seven-point plan to combat the virus, of which the two most important points are:
To ensure all Americans have access to regular, reliable, and free testing;
To implement mask mandates nationwide by working with governors and mayors and by asking the American people to do what they do best: step up in a time of crisis. Biden’s determination to beat the virus without resorting to a lockdown is rather negative for gold prices.
When it comes to economic recovery Biden plans to build more modern infrastructure, which implies higher government spending. Importantly, Biden plans to partially fund these expenditures by reversing some of Trump’s tax cuts for corporations.
His plans of reforming the labor market will also be a good idea to recover from the on-going crisis. He proposes more than doubling the minimum wage, raising it from $7.25 to $15 an hour. Biden’s economic agenda could benefit gold somewhat, especially if higher infrastructure spending is financed by large fiscal deficits and if it further increases public debt.
To sum up, Biden’s presidency could be somewhat positive for gold prices due to higher government spending and anti-corporate points like the reversal of Trump’s tax cuts and increasing labor costs (raising the minimum wage, etc.). However, Biden’s impact on the gold market is likely to be smaller than previously thought by many analysts.