Gold Nears Record High Amid US Election and Fed Policy Shifts

As the 2024 US presidential election approaches, gold is nearing a fresh all-time high, driven by its role as a safe-haven asset.

Investors are adjusting their portfolios to navigate potential turbulence tied to the election and anticipated shifts in US Federal Reserve policy.

This has resulted in gold becoming one of the strongest-performing commodities of the year, with its price up approximately 30%.

Election Tensions Fuel Gold's Rally Polls indicate a tight race, with Republican candidate Donald Trump hinting at major policy changes if he returns to office, including steep tariffs, tax cuts, and greater involvement with the Fed.

These policies could have wide-reaching effects on trade, inflation, and the US dollar, all of which are critical factors in gold's price movement.

The US Dollar and Gold’s Performance Despite a 4.98% rise in the US Dollar Index (DXY), gold has surged by more than 54.71% since its 2022 lows, as seen in the accompanying chart.

This inverse relationship between gold and the dollar suggests that while a stronger dollar typically weighs on gold prices, 2024’s geopolitical risks and expectations of looser monetary policy are pushing investors towards gold as a hedge against uncertainty.

Fed Policy and Inflation Hedge Central banks' demand for gold and investors' concerns over US interest rates are further supporting the metal’s price.

With the Federal Reserve expected to pivot towards cutting rates in 2025, there’s growing belief that a weaker dollar and rising inflation will continue to drive gold higher.

This trend is reflected in market surveys, with experts forecasting that gold could reach $2,917.40 per ounce by the end of 2025, around 10% above current levels.

Key Market Drivers

• US Election Outcome: Gold tends to perform well during periods of political and economic uncertainty. A contested or delayed election could drive prices even higher.

• Federal Reserve's Interest Rate Path: As the Fed considers rate cuts to support economic growth, a weaker dollar and looser monetary policy could further boost gold.

• Trade Policies: If Trump returns to power and reinstates tariffs, inflation could rise, providing further support for gold, despite potential dollar strength.

Gold Price Projection Based on Election Outcomes and Fed Policy Scenarios

Below is a projection of gold prices based on three key scenarios that take into account possible election outcomes and shifts in Fed policy:

Scenario 1: Trump Victory with Hawkish Trade Policies

• Trade and Tariffs: Increased tariffs under Trump could push inflation higher, supporting gold as an inflation hedge. However, a strong dollar could limit gold’s rise.

• Projection:

  • Short-term (3-6 months): Gold stabilises around $2,700–$2,850.

  • Long-term (12 months): Gold could peak around $2,950 if inflation persists but the dollar strengthens.

Scenario 2: Harris or Democratic Win with Dovish Fed

• Fiscal Policy: A Harris win would likely result in more stable trade policies but looser monetary policies, leading to a weaker dollar.

• Projection:

  • Short-term (3-6 months): Gold rises sharply to $2,900 as the dollar weakens.

  • Long-term (12 months): Gold could break $3,100 if inflation picks up and the Fed cuts rates.

Scenario 3: Contested Election with Economic Uncertainty

• Political Uncertainty: A contested or delayed election result would significantly increase geopolitical uncertainty, pushing gold higher as investors seek safety.

• Projection:

  • Short-term (3-6 months): Gold could surge to $2,900–$3,000.

  • Long-term (12 months): Continued uncertainty could push gold past $3,200 if the Fed delays policy action and economic risks materialise.

Summary of Projections

Scenario	Short-Term (3-6 Months)	Long-Term (12 Months)
Trump Victory with Hawkish Trade Policies	$2,700 - $2,850	$2,950
Biden/Democratic Win with Dovish Fed	$2,900	$3,100
Contested Election and High Uncertainty	$2,900 - $3,000	$3,200

Conclusion

Gold’s performance through the end of 2024 and into 2025 will be heavily influenced by the election outcome and Federal Reserve policies.

While each scenario offers slightly different outlooks, all point towards continued gains for gold, particularly in the face of inflation, uncertainty, and shifts in monetary policy. In the most extreme case, gold could exceed $3,200 by the end of 2025.