Best of the Week
Most Popular
1. Will Gold Price Breakout? 3 Things to Watch… - Jordan_Roy_Byrne
2.China Invades Saudi Oil Realm: PetroDollar Kill - Jim_Willie_CB
3.Bitcoin Price Trend Forecast, Paypal FUD Fake Cryptocurrency Warning - Nadeem_Walayat
4.The Stock Market Trend is Your Friend ’til the Very End - Rambus_Chartology
5.This Isn’t Your Grandfather’s (1960s) Inflation Scare - F_F_Wiley
6.GDX Gold Mining Stocks Fundamentals - Zeal_LLC
7.US Housing Real Estate Market and Banking Pressures Are Building - Chris_Vermeulen
8.Return of Stock Market Volatility Amidst Political Chaos and Uncertain Economy - Buildadv
9.Can Bitcoin Price Rally Continue After Paypal Fake FUD Attack? - Nadeem_Walayat
10.Warning Economic Implosion on the Horizon - Chris_Vermeulen
Last 7 days
Russia Buys 300,000 Ounces Of Gold In March – Nears 2,000 Tons In Gold Reserves - 24th Apr 18
Stock Market Study Shows Why You Shouldn’t “Sell in May and Go Away” - 24th Apr 18
CRYPTOCURRENCY MASTERCLASS #CRY90 - 24th Apr 18
UK Gambling Statistics - What the Numbers Say - 24th Apr 18
Chaos Capitalists Short Countries - How Chanos Got China Wrong - 24th Apr
Artificial Intelligence Defines the Political News Narrative - 24th Apr 18
Stock Market "Oops, They Did It Again" - 24th Apr 18
Fox in the Henhouse: Why Interest Rates Are Rising - 23rd Apr 18
Stocks and Bonds, This is Not a Market - 23rd Apr 18
Happy Anniversary Silver Investors! - 23rd Apr 18
The Hottest Commodity Play In 2018 - 23rd Apr 18
Stock Market Correction Turns Consolidation - 23rd Apr 18
Silver Squeeze, Gold Fails & GDX Breadth - 23rd Apr 18
US Economy Is Cooked, the Growth Cycle has Peaked - 23rd Apr 18
Inflation, With a Shelf Life - 23rd Apr 18 - Gary_Tanashian
Stock Market Predictive Modeling Is Calling For A Continued Rally - 22nd Apr 18
SWEATCOIN - Get PAID to WALK! Incentive to Burn Fat and Lose Weight - Review - 22nd Apr 18
Sheffield Local Elections 2018 Forecast Results - 22nd Apr 18
How Long Does it take for a 10%+ Stock Market Correction to Make New Highs - 21st Apr 18
Sheffield Ruling Labour Party Could Lose 10 Council Seats at May Local Elections - 21st Apr 18
Crude Oil Price Trend Forecast - Saudi Arabia $80 ARAMCO Stock IPO Target - 21st Apr 18
Gold Price Nearing Bull Market Breakout, Stocks to Follow - 20th Apr 18
What’s Bitcoin Really Worth? - 20th Apr 18
Stock Market May "Let Go" - 20th Apr 18
Overwhelming Evidence Against Near Stock Market Grand Supercycle Top - 20th Apr 18
Crude Oil Price Trend Forecast - Saudi's Want $100 for ARAMCO Stock IPO - 20th Apr 18
The Incredible Silver Trade – What You Need to Know - 20th Apr 18
Is War "Hell" for the Stock Market? - 19th Apr 18
Palladium Bullion Surges 17% In 9 Days On Russian Supply Concerns - 19th Apr 18
Breadth Study Suggests that Stock Market Bottom is Already In - 19th Apr 18
Allegory Regarding Investment Decisions Made On Basis Of Government’s Income Statement, Balance Sheet - 19th Apr 18
Gold – A Unique Repeat of the 2007 and How to Profit - 19th Apr 18
Abbeydale Park Rise Cherry Tree's in Blossom - Sheffield Street Tree Protests - 19th Apr 18
The Stock Market “Turn of the Month Effect” Exists in 11 of 11 Countries - 18th Apr 18
Winter is Coming - Coming Storms Will Bring Out the Best and Worst in Humanity - 18th Apr 18
What Does it Take to Create Living Wage Jobs? - 18th Apr 18
Gold and Silver Buy Signals - 18th Apr 18
WINTER IS COMING - The Ongoing Fourth Turning Crisis Part2 - 18th Apr 18
A Stock Market Rally on Low Volume is NOT Bearish - 17th Apr 18
Three Gold Charts, One Big Gold Stocks Opportunity - 17th Apr 18
Crude Oil Price As Bullish as it Seems? - 17th Apr 18
A Good Time to Buy Facebook? - 17th Apr 18
THE Financial Crisis Acronym of 2008 is Sounding Another Alarm - 16th Apr 18
Bombs, Missiles and War – What to Expect Next from the Stock Market - 16th Apr 18
Global Debt Bubble Hits New All Time High – One Quadrillion Reasons To Buy Gold - 16th Apr 18
Will Bitcoin Ever Recover? - 16th Apr 18
Stock Market Futures Bounce, But Stopped at Trendline - 16th Apr 18
How To Profit As Oil Prices Explode - 16th Apr 18
Junior Mining Stocks are Close to Breaking Downtrend - 16th Apr 18
Look Inside a Caravan at UK Holiday Park for Summer 2018 - Hoseasons Cayton Bay Sea Side - 16th Apr 18
Stock Market More Weakness? How Much? - 15th Apr 18
Time for the Gold Bulls to Show their Mettle - 15th Apr 18
Trading Markets Amid Sound of Wars - 15th Apr 18
Sugar Commodity Buying Levels Analysis - 14th Apr 18
The Oil Trade May Be Coming Alive - 14th Apr 18

Market Oracle FREE Newsletter

Trading Lessons

Gold around U.S Presidential Elections

Commodities / Gold and Silver 2016 Sep 23, 2016 - 04:55 PM GMT

By: Arkadiusz_Sieron

Commodities

In previous articles, we examined gold's performance in the presidential election cycles. The only relatively reliable conclusion we were able to draw from the long-term analysis is that the post-election year is the worst for the price of gold in the whole cycle. Let's now focus on gold's short-term dynamics around election time.

The two charts below show the dynamics of gold prices thirty trading days before Election Day and thirty days after.


Chart 1: Gold prices thirty trading days before and after U.S. Presidential Elections in the 1970s and 1980s (index; the price of gold from the Election Day = 100).

Gold prices around US elections in the 1970s and 1980s

Chart 2: Gold prices thirty trading days before and after U.S. Presidential Elections in the 1990s and 2000s (index; the price of gold from the Election Day = 100).

Gold prices around US elections in the 1990s and 2000s

Again, no clear pattern emerges. For example, after the elections in 1972 gold continued for a week its downward trend which started a few weeks before, reaching a bottom before it rallied later. On the other hand, in 1976 the yellow metal continued its upward trend and jumped 2.73 percent the day after elections. It seems that elections do not significantly move the gold market, at least over two-month spans. But what if we extend or shorten the periods?

The next chart shows returns of gold in four periods of thirty days around the U.S. presidential elections (they are scheduled for Tuesday after the first Monday of November, therefore we decided to analyze four thirty day periods rather than calendar months) between 1972 and 2012.

Chart 3: The monthly returns of gold (London P.M. Fix) in the four months around U.S. presidential elections between 1972 and 2012.

Gold Prices around elections 1972-2012

You can clearly see a certain pattern now. Historically, gold gained the most in September/October period and performed the worst in December/January period over the presidential election cycle. It is in line with the widely known fact that September is one of the best months to own gold (gold's seasonality). The data also shows that, on average, the price of gold falls (-1.25 percent) in October/November, but rebounds in November/December (1.01 percent), just to decrease (-1.66) again in December/January. This pattern was clearly seen in the last U.S. presidential elections. Let's look at the gold chart below.

Chart 4: The price of gold at the time of the 2012 U.S. Presidential Election.

Gold prices around the 2012 election

The price of gold increased in September, but started to decline around one month before the elections. Interestingly, the shiny metal rebounded just after November 6, exactly on the Election Day. However, after three weeks the price of gold returned to its downward trend. Without a detailed study, it is hard to say anything with certainty, but such behavior may be attributable to the elections.

The next chart presents the comparison between the average monthly returns of gold in November in election and non-election years. In 1971-2015 period, gold lost in election years 0.04 percent, on average, during that month, while gaining only 0.07 in non-election years and 0.04 percent overall.

Chart 5: The monthly average returns of gold in Novembers overall, in election years and non-election years since 1971.

November returns on gold

This behavior would suggest that elections are detrimental for the price of gold if not for one small thing: gold was stronger in non-election years in 9 of 12 calendar months. For the sake of clarity, we limited the graphical presentation of such behavior to crucial months around election time (see the Chart 6). Therefore, it is hard to conclude from this data that the U.S. presidential elections significantly affect the gold market - it may be that non-election years were just generally more bullish for the gold market.

Chart 6: The monthly average returns of gold in September, October, November, December and January overall (blue columns), in election years (red columns) and non-election years (green columns) in 1971-2015.

September to January returns on gold

Let's now focus on the very short-term gold response to U.S. presidential elections. As one can see in the chart below, there is no clear trend, as the price of gold increased six times the next day after election and decreased five times, with the average response of a 0.56 percent jump.

Chart 7: The daily returns of gold the next day after the U.S. Presidential Elections from 1972 to 2012.

Gold immediate reaction to US Presidential elections

The strongest reaction occurred after Carter victory and both of Obama's. This may be attributed to some worries about their fiscal policies, but it may also be the case that gold reacted more positively during bull markets. The Carter example is instructive as he was considered an outsider distant from Washington, D.C. just like Donald Trump. Therefore, if Trump wins, the price of gold may rise in the short-term. However, we must conclude that our extensive analysis suggests that, in the long-term, the yellow metal is affected by the U.S. economy and monetary policy rather than the U.S. presidential elections.

Thank you.

If you enjoyed the above analysis and would you like to know more about the gold ETFs and their impact on gold price, we invite you to read the April Market Overview report. If you're interested in the detailed price analysis and price projections with targets, we invite you to sign up for our Gold & Silver Trading Alerts . If you're not ready to subscribe at this time, we invite you to sign up for our gold newsletter and stay up-to-date with our latest free articles. It's free and you can unsubscribe anytime.

Arkadiusz Sieron
Sunshine Profits‘ Market Overview Editor

Disclaimer

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

Arkadiusz Sieron Archive

© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules