- The financial markets are exhibiting huge volatility with the US presidential race on and political tensions running high
- Some analysts are of the belief that President Trump’s victory will lead to an increase in the value of the dollar and Biden’s win will lead to a downfall in the value
- As a result of the economic downturn, the year 2020 has already witnessed a spectacular rally in the gold price
- Following weeks of speculation, investors are looking forward to the outcome of the election
The US presidential election 2020 has witnessed a record of more than 100 million votes cast, as per projections. To secure more voters to the polling booths, Democratic contender Joe Biden and President Donald Trump had been campaigning through the final day. Both the rivals are fiercely battling it out in the race to the White House.
Currently, the presidential race is being led by Joe Biden with around 220 electoral votes, while Trump is lagging with 213 votes. The crucial states of Florida, Ohio and Texas have been taken over by the current US President, and he is also currently leading in Georgia.
The financial markets are exhibiting a huge amount of volatility with the US presidential race on and political tensions running high. There lies uncertainty in the future price of commodities, currency and stocks. There has been historical precedence of the US Presidential election influencing financial markets. Talking about the gold prices, since1971, there has been greater responsiveness to the macroeconomic landscape change.
Where Would the Price of Gold Go?
The election’s impact on the price of gold is a topic of debate. It is a general perception that there exists a correlation between the price of gold and the value of the US dollar. Higher the value of the dollar means lower the price for gold and vice versa.
Some analysts are of the belief that President Trump’s victory will lead to an increase in the value of the dollar and Biden’s win will lead to a downfall in the value of the greenback. However, it is not certain, and there’s an equal possibility that the opposite could come true.
During 2016 US elections, when Donald Trump had won, the stocks rallied, and the price of gold had fallen. It’s because of this reason that investors are speculating that if he does not wins in 2020, the stock market will crash, propelling the price of gold. But it cannot be said firmly because the stock market has already seen an unprecedented crisis because of the coronavirus pandemic.
As a result of the economic downturn, the year 2020 has already witnessed a spectacular rally in the gold price. The governments have introduced massive stimulus packages, the interest rate has consistently been lower, the geopolitical tensions have escalated. All these factors have pushed the gold price to hit a fresh record of 2,000 ounce per dollar.
Gold prices have remained choppy on the election result day, with the US elections heading towards a tight finish. Gold was down 0.74 per cent at GBP 1,453.22 per ounce on 4 November 2020 at 11:22 AM GMT in global markets, reflecting that the outcome of the US presidential race could be closer than polls had projected between Donald Trump and Joe Biden. Following weeks of speculation, investors are looking forward to the outcome of the election.
However, what will happen to the price of gold if Joe Biden or Donald Trump wins the 2020 US election remains unanswered.
Investment in Gold Stocks
Gold is considered as a diversifying investment. However, the mining sector companies that are engaged in extracting gold experience high volatility. For investing in gold, an investor can opt for exchange-traded funds (ETFs), buy stocks of gold miners or buy physical gold.
There exist many LSE-listed gold stocks in the UK. From large-cap FTSE 100 gold miners to small-cap gold explorer, there exists plenty of options for an investor.
Amid the ongoing tensions and speculations going on, let’s focus on how the gold stocks have been reacting on the LSE:
Greatland Gold PLC (LON: GGP)
The gold mineral exploration and mining company, Greatland Gold PLC has been granted mining lease for the Havieron gold-copper deposit by the Western Australian Department of Mines, Industry Regulation and Safety in the month of September 2020. Greatland recently gave an updated on the four new potential targets that have been identified at Havieron, namely Eastern Breccia, Northern Breccia, North West Crescent, and South East Crescent and Breccia.
The stock has been successful in delivering a price return of 1,088.52 per cent in a period of the last ten months.
On 4 November 2020 at 11:33 AM, at the time of writing the report, the shares of Greatland Gold PLC were trading at GBX 21.74 on the London Stock Exchange. On 3 November 2020, the stock price closed at GBX 21.75. The company had a total market capitalisation of £842.38 million.
Eurasia Mining Plc (LON: EUA)
Incorporated in 1995, Eurasia Mining Plc, a mineral exploration company recorded a revenue of £48,012 (30 June 2019: £13,316) for half-year ending 30 June 2020. Definitive Feasibility Study for the West Kytlim's resources is on the company’s schedule. The new license secured in the Tipil Area (24.5 square kilometers) aims to increase the life of mine. James Nieuwenhuys has recently been appointed as the Chief Executive Officer and Executive Director of the company.
The stock has delivered a price return of 704.05 per cent in a period of the last ten months.
On 4 November 2020 at 11:42 AM, at the time of writing the report, the shares of Eurasia Mining PLC were trading at GBX 31.00 on the London Stock Exchange. On 3 November 2020, the stock price closed at GBX 29.75. The company had a total market capitalisation of £820.71 million.
Altyn Plc (LON: ALTN)
Previously known as GoldBridges Global Resources Plc, Altyn PLC is involved in the production of precious metals such as gold and silver.
In the half-year ending on 30 September 2020, the turnover of the company increased to US$11.5 million (H1 2019: US$7.2 million). An operating profit of US$3.9 million was recorded by the company (H1 2019: profit of US$1.3 million), with a net profit before taxation of US$1.0 million (H1 2019: loss of US$0.6 million). Gold production for H1 2020 from Sekisovskoye was recorded as 6,990 oz (H1 2019: 5,561 oz).
The stock has delivered a price return of 231.40 per cent in a period of the last ten months.
On 4 November 2020 at 11:52 AM, at the time of writing the report, the shares of Altyn Plc were trading at GBX 1.88 on the London Stock Exchange. On 3 November 2020, the stock price closed at GBX 1.72. The company had a total market capitalisation of £46.88 million.
Absolute prediction of what could happen to the price of gold if Biden or Trump wins is very difficult. Other factors such as massive stimulus packages, increasing worry of a debt crisis, unexpected changes keep driving the price of the yellow metal.
High yielding dividend stocks may be a good bet amid lower Government Bond yield regime.
With yields on UK government bonds are at a record low, stocks with higher dividend yield (%) will be back in investor’s attention.
Dividend stocks usually do not get into a free fall and outperform most of the time.
Dividend stocks are easy to get cash flow from your stock investments without liquidating anything. Further, you can use dividends to buy additional units of stock. And, if you reinvest dividends, you can significantly increase your long-term return from your investments because of the power of compounding.