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After months of campaigning, and, according to the Financial Time’s analysis, some $3.5 billion spent by both parties on the campaign trail, (President) Donald Trump returns to office with a convincing victory. (Donald Trump and Kamala Harris spend $3.5bn in most expensive presidential election)
The campaign trail was festooned with celebrity endorsements, with Kamala Harris attracting the backing of names such as Jennifer Lopez and Beyonce, and Donald Trump who graced the public with the enterprising Elon Musk, and showman including the enviable Hulk Hogan (Terry Bolea) and Mel Gibson.
Putting all the pomp and ceremony to one side, what does the election result mean for the gold price?
The initial reaction has been for the US dollar, US equities and bond yields moving sharply higher, whilst the gold price has retraced from highs. The reason may lie in the nature of the win. Trump’s republicans party has secured a majority in the Senate, potentially giving Trump extensive powers to cut taxes and impose tariffs on imported goods, which was seen as a positive for the US currency. Trump’s tariff and immigration policies were perceived as inflationary by analysts, buoying yields and the dollar. (Wall Street and bitcoin soar to record highs as Trump wins US election | Currencies | The Guardian)
The resounding victory has removed the policy uncertainly cast over markets in the run up to the election result, hence the relief rally in risk assets and the US dollar. This dollar strength in turn could lead the US Federal reserve to pausing its easing of interest rates, particularly if trade tariffs prove to be as inflationary as expected. (Gold hastens retreat as dollar rallies on Trump victory | Reuters)
Under a Trump administration, we can expect large tax cuts, which is to be partly funded through higher import trade tariffs and reductions in environmental spending. He has also proposed considerable spending increases in sectors such as defence, border control and immigration, and suggested more gradual hikes to spending on health care and housing.
However, the balance of these proposed measures would almost certainly increase US government deficit, and thus enlarge its debt pile. The extent to which his tax and spending plans are implemented will now be determined largely by whether the Republicans control Congress (The Senate and House of Representatives).
The returning president is to reinstate his tough stance on immigration, ‘promising’ to deport around 11 million unauthorised migrants from the United States. He also proposes to have closer controls on legal migration, imposing extreme vetting of visa candidates and ideological screening.
The extent to which President Trump’s campaign rhetoric is put into action will, as mentioned, largely depend on who controls congress, specifically the House of Representatives. A party needs 218 seats to take control, and the final votes will trickle through over the coming days, with the key battleground of California offering up five seats to contest for, and two available from the Arizona state.
Over the coming weeks and months, it will become clear how far reaching the new president’s agenda will be. What’s more, he now benefits from being battle hardened from his first term in office, and is better attuned to the working of government which is likely to accelerate his policy plans, and impact on US economic policy.
Sources
Donald Trump and Kamala Harris spend $3.5bn in most expensive presidential election
Gold hastens retreat as dollar rallies on Trump victory | Reuters
Who will win the House? Here are the outstanding races to watch - BBC News
The Trump agenda: Here’s what to expect from his second term - POLITICO
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