November 5 - Today is D-Day in the USA. But we won't know the results of the US presidential election from the perspective of our time zone until Wednesday morning at the earliest.
Or rather, we'll know the winner on Wednesday morning perhaps. According to the polls, it looks like Donald Trump's race so far with Kamala Harris is extremely close, so the winner will probably not be known again immediately after the polls close. There is even a recount in play, so hypothetically we could be waiting several days for the results. In 2020, the announcement of the winner was waited until the end of the week due to very close results, and something similar could happen this time. And that, of course, does not add to the calmness of the financial markets at all. You could say that the financial world is somewhat paralysed and is waiting to make any major decisions.
In Prague, billboards on a television station entice people to watch the election with the slogan that the results will change the world. It's not a far-fetched claim. The two candidates are as different as night and day on issues such as migration, genderism, taxation, involvement in wars, and fossil versus renewable energy. The next few hours will undoubtedly decide the direction of not the whole world, but certainly 'our' world in the form of the Euro-Atlantic area. By this time tomorrow, it will probably be clear whether stocks will rise or fall, whether interest rates will be lower or higher. Whether house prices will end up inflating the bubble or deflating it. Only one asset is likely to behave pretty much the same in both possible cases.
Here's a little hint as to what asset it is. Today, two unrelated reports came out at random. The first report: Offer prices for residential property in Slovakia rose again between July and the end of September, and are already higher than the same period last year. The second report: in the UK, new car registrations fell by 6.0 % year-on-year against a previous rise of 1.0 %. Yes, those reports are not very related. And yet they are related in some respects.
The first report says that although economic growth in the EU is in decline, house prices are already rising again. Why are they rising? Because people are afraid of inflation and classic financial investments. The second report says that industry in Europe continues to disintegrate, i.e. that official GDP growth figures overstate the idea of the economy's productive capacity. So we have an economic downturn, hidden inflation and a flight to real assets. And on top of that, uncertainty about the future direction of the US. That's a big enough clue to guess that the asset that will rise no matter who becomes the next US president is the safe-haven asset that is gold.
Gold has been practically stagnant for the last five days. But in terms of recent weeks, its record rise continues. In October alone, gold gained 5 % and has even gained 34 % since the beginning of the year. It is only surpassed by silver, which has gained 42.3 % since the beginning of the year. It must be said that neither of these metals is showing the classic price movement that usually accompanies the inflation of a price bubble. There is no euphoria. Small investors are even becoming more and more concerned and are more often considering whether gold is already "overheated" before buying. That's not what inflating a bubble looks like. The whole point of gold at an all-time high is that investors, even the biggest institutional ones, are looking for at least some certainty in a highly uncertain time.
Someone is hedging against the outcome of the US election. And by the way, here comes the funny point where some who want a functioning free market are hedging against Harris, and others who want more monopolisation and money printing are hedging against Trump. Some are hedging against monetary policy. And again, the funny thing is that the people who hedge the most against central bank monetary policy are - the central banks themselves, who buy gold instead of fiat currencies for their foreign exchange reserves. The Chinese are interested in gold to offset any losses in the real estate market.
And so the conclusion is that although some people may calm down after the US election and the price may fall a little, it would be a small episode, and on the contrary we can expect gold prices to continue to rise in the long term, whatever the outcome of the election. Which cannot be said of other types of investment assets.
Markéta Šichtařová
Eurodeník 5. 11. 2024 Next Finamce s.r.o. Nextfinance.cz
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