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    • Here’s what the US presidential election means for gold and silver
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    Here’s what the US presidential election means for gold and silver

    Online Niel Posted on

    As we have seen, there is no clear link between the party in the White House and the performance of precious metals – at least historically. I think that regardless of which party wins, the long-term outlook for gold and silver remains bright. Both sides have shown a strong tendency to increase national debt – a factor that supports a bullish case for precious metals, as illustrated in the chart below.

    Although Republicans are often seen as the most fiscally conservative, the national debt — now nearly $36 trillion — has grown at an average annual rate of 10.4 percent under Republican presidencies since 1980, compared with 7 percent under democratic administrations. It is worth noting that the higher debt growth during the Republican tenure is largely due to Ronald Reagan’s significant defense spending during the Cold War. There is a real risk that ambitious initiatives supported by Democrats, such as a potential Green New Deal, Universal Basic Income (UBI) and their funding through the principles Modern Monetary Theory (MMT)it would drive the national debt much higher – an outcome that would be very bullish for gold and silver.

    Examining US federal budget surpluses and deficits as a percentage of GDP can also highlight whether either party tends to run larger deficits. My findings show that since 1980, there has been little difference between Democrats (an average annual deficit of -3.86%) and Republicans (-3.72%). This reinforces my view that the outlook for gold and silver remains strong regardless of the party in power, as both will continue to run budget deficits well into the future.

    Money supply growth is the reason for inflation, and gold and silver benefit from long-term inflation. Nobel Prize winning economist Milton Friedman famously stated, “Inflation is always and everywhere a monetary phenomenon.” The graph of the M2 money supply below illustrates its steady growth regardless of the political party in power – a trend I expect to continue.

    The M2 money supply includes all currency in circulation, checking accounts, traveler’s checks, savings deposits, time deposits under $100,000, and mutual fund shares in the retail money market. Since 1980, M2 has grown at an average annual rate of 5.63% under Democratic presidents and 6.93% under Republican presidents, the latter figure being significantly influenced by the high growth rates during the Reagan era.

    The chart below shows how gold tracks the M2 money supply higher over time:

    Looking at inflation itself, the US Consumer Price Index (CPI) – a measure of the cost of consumer goods and services over time – has risen steadily regardless of the political party in the White House. Since 1980, the average annual inflation rate under Democratic presidencies has been 3.1 percent, compared to 3.5 percent under Republican presidencies, the latter figure skewed by the Reagan years. I expect inflation to continue to rise regardless of who is in office, which should support the case for gold and silver.

    One of the main reasons I expect inflation to accelerate in the coming years is the increasingly precarious fiscal position of the United States. As the chart below shows, the national debt has grown at a much faster rate than the economy, making our debt burden significantly worse. As the government approaches its fiscal limits, it will have much less flexibility to support the economy during recessions or national emergencies through traditional stimulus measures. This increases the likelihood that the government will eventually resort to outright debt monetization or “money printing” to cover spending, which would lead to rapid inflation and push gold and silver to remarkable highs.

    Even more worrying is the US Congressional Budget Office PROJECTION federal debt held by the public as a percentage of GDP will rise from just under 100% today to about 170% over the next few decades:

    Since the 2020 pandemic, the combination of America’s rising national debt and rising interest rates has doubled annual interest payments to more than $1.1 trillion:

    As of this year, gross interest on the US debt has overdue expenses for defense, income security, health, veterans’ benefits, and even Medicare, making it the second largest expense for the U.S. government—after only Social Security, which totals about $1.5 trillion annually:

    In light of these factors, the long-term outlook for gold and silver remains robust regardless of political leadership. With a steadily rising national debt, rising interest-bearing obligations, and an accelerating trend toward monetary expansion, the economic and fiscal environment is increasingly supportive of precious metals. Inflationary pressures, driven by aggressive monetary policies and large-scale government spending, are likely to persist and intensify, increasing the appeal of gold and silver as safe-haven assets. Whether due to fiscal policies or structural economic challenges, precious metals are positioned to thrive in a landscape where financial stability is increasingly at risk.

    About Jesse Colombo

    Jesse Colombowriter of The Bubble Bubble newsletter, is a renowned free markets and sound money analyst, investor, writer and advocate with a substantial online following.

    In 2008, he was recognized by the London Times for accurately predicting the global financial crisis.

    In this newsletter, Jesse provides in-depth reports on the often overlooked but potentially dangerous emerging economic bubbles worldwide. He also provides actionable analysis of precious metals and other markets.

    Follow Jesse Colombo on X

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    YouTube: https://www.youtube.com/@JesseColombo

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