Gold, silver, and mining companies had a rough start in 2024, but this situation is about to change.
Americans like winners, and in this year’s U.S. presidential race, Biden is clearly the loser. During Biden’s tenure, the U.S. government’s debt soared, wars continued, the Russia-Ukraine conflict erupted, and the Middle East’s tense situation suddenly escalated. Who knows what lies ahead?
On January 23, the Republican primary vote for the 2024 U.S. presidential election held in New Hampshire has ended, and several U.S. media outlets subsequently predicted Trump’s victory. Previously released polls showed Trump leading Nikki Haley by over 10 percentage points. Wall Street hopes that Trump’s “Spring and Autumn Dream,” of being defeated in the primaries, will come to an end.
If Trump eventually wins, what does it mean for the stock market and gold?
First, the stock market. There is a key point of knowledge here, the “Seven Giants of the U.S. Stock Market,” referring to the seven major technology companies that contributed up to 65% of the S&P 500 index’s gains. According to traditional price-to-earnings ratio indicators, the U.S. stock market has been significantly overvalued, but when it comes to the PEG valuation (the ratio of the price-to-earnings to the earnings growth rate), the valuations of the tech giants become reasonable again.
Therefore, as long as the profit growth rate does not suddenly decline and cause a surge in the PEG, the U.S. stocks are at most in the range of profit-taking sales rather than at their peak, and Trump is unlikely to be the catalyst for that. In terms of tax cuts, Trump will not have too much action, and he will be more responsible in issuing new debt than Biden, who worships war, but he is enthusiastic about tariffs. We know that tariffs tend to raise inflation, which is negative for the dollar and positive for gold.
If we look at historical trends, we will find that the prices of gold, silver, and mining companies usually rise in U.S. election years.
For example, from January to August 2016, the mining fund VanEck Gold Miners ETF (GDX) plummeted in January and hit bottom on the 20th, then rose nearly 200% in just eight months. Now, let’s look at the 2020 election year. Also from January to August, despite the exceptional volatility due to the COVID-19 factor, the overall trend was still a significant increase.
From a technical analysis perspective, in the spot market, $2010 is a buy zone for aggressive players. In addition, in the futures market, the Stochastic Oscillator (also known as the KDJ indicator) also shows that the gold price is in the oversold zone and is flashing a buy signal.”
