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Gold prices surged on Wednesday (November 4) climbing above US$4,000 per ounce as the US dollar weakened following the US midterm elections.
Spot gold advanced to US$4,063 per ounce, while spot silver jumped to US$52.32 per ounce by 4:55 p.m. ET. The US Dollar Index fell around 0.3 percent on Wednesday, trading near 101.5, and treasury yields moved lower.
The election results handed Democrats control of both the House of Representatives and the Senate, leaving President Donald Trump facing a Congress controlled by the opposing party for the remainder of his term.
Mounting debt crisis
If the US continues to accumulate debt, concerns about the country's finances could weigh on confidence in the dollar and support demand for gold. However, the metal's longer-term direction will still depend on inflation, interest rates and the Federal Reserve's policies.
Speaking at the New Orleans Investment Conference ahead of the elections, Rich Checkan, president and COO of Asset Strategies International, said the outcome would have little impact on gold's long-term trajectory unless it resulted in meaningful government spending cuts.
Watch the full interview to hear more from Checkan on the election outcome.
“When it comes to precious metals, unless we are voting in a majority of politicians in this midterm who are then going to cut spending … unless that happens, gold is going higher,” he told Investing News Network.
According to him, persistent government overspending, rising debt and continued money creation would remain key drivers for gold, regardless of which party gained control of Congress.
He added that a Democratic wave could provide a short-term boost if Republican investors turned to gold amid political uncertainty.
Meanwhile, economist Peter Schiff said a Democratic takeover of Congress could be bullish for gold and silver. He expects Democrats to push for increased government spending and larger deficits, putting further pressure on the Federal Reserve to monetize government debt.
Watch the full interview for more insights from Schiff.
Schiff believes the Fed could eventually turn to quantitative easing (QE) to contain rising bond yields, a move he sees as supportive of precious metals. He also argued that growing fiscal pressures could worsen inflation and undermine confidence in the US dollar.
Like Schiff, precious metals analyst Craig Hemke believes a potential Democratic takeover of Congress to be positive for gold.
Listen to Hemke explain where he sees the precious metals market going.
Hemke suggested that increased political gridlock and investigations into the Trump administration could stall its agenda and further undermine confidence in the US dollar and Treasury market.
He said Democrats could provide another boost for gold, although he cautioned that the broader market reaction would be difficult to predict.
“You can see where a big Democrat shift could be coming,” he said, “But then to try to figure out the knockoff reactions of all these different markets, it's impossible to say.”
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Securities Disclosure: I, Aastha Sethi, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence