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    Examining the global gold price on the eve of the US elections

    شناسه : 32356 29 مهر 1399 - 16:47
    This will have a direct impact on all global markets, including gold, which we will address in this analysis. In less than a month until the 2020 US election, political tensions in the country are rising. Rising US political risk alone could be the main cause of rising global gold prices.
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    The US presidential race has gone through two hot weeks and the news and scenarios of this race have affected the world economic currents. This will have a direct impact on all global markets, including gold, which we will address in this analysis. In less than a month until the 2020 US election, political tensions in the country are rising. Rising US political risk alone could be the main cause of rising global gold prices. Because gold is a safe haven for capitalists to invest in high-risk political situations. On the other hand, political risks have caused fluctuations in the financial markets of the world because the prices of currencies, commodities and stocks based on the world price of gold are uncertain in the future.

     

    *** The impact of the US election on the world price of gold

    The impact of the US election on the world price of gold has been the subject of much debate in the world financial markets because so far there has been no dichotomy in US political conditions and hidden scenarios such as the peaceful end of the election campaign have been formalized. The post-election situation, and many American politicians have expressed concern about it, is Trump’s refusal to accept Jubaiden’s victory and hand over the White House to him, which has broken all the rules of the world political order and the same risk in In the short term, the price of world gold has stabilized at its highest level.

     

    *** Global gold and dollar relationship

    On the other hand, in general, because the US currency is backed by gold, the value of the US dollar is directly related to the price of gold. This means that a higher value of the dollar means a lower price of gold, while a weaker dollar means a higher price of gold. Recent developments in the United States, such as rising unemployment, a lack of principled control of Coronavirus, unilateral and off-the-shelf sanctions such as the United Nations, the consuming US trade war against China, and the disregard for environmental treaties are all examples. Are the cause of the devaluation of the dollar and a channel for the growth of world gold prices.

    On the other hand, the American political and economic structure is tied to the price of world gold. Some believe that Trump’s victory will increase the value of the dollar because he is a supporter of the capitalist system in the United States, and the stock market and other American financial markets will show positive confidence if he wins, and Biden’s victory will devalue the dollar. Global gold prices are likely to rise, leading to a drop in US stocks.

    What are the scenarios for the global gold price in the current situation? This is a question that investors in precious metals should ask themselves, but there are many factors that must be considered before concluding.

     

    *** Three scenarios for the global gold price

    When Donald Trump won the 2016 election, the price of gold fell and stocks rallied together in red, so the reason is that if he loses the presidency in 2020, a fall in the stock market will increase The price of gold will. But things are never so simple. The stock market has seen unprecedented competition this year, largely with the US government’s broad incentive indicators for full participation in the financial market. Therefore, the US stock market cannot be evaluated one-dimensionally. Therefore, we must consider all possible permutations of the US election scenario:

    Biden won the election, and as a result, the Democrats took control of the House and Senate.
    Biden wins the election but does not win the Senate.
    Biden loses and Trump wins.

     

     

    *** Complete democratic control scenario

    In the first scenario, the Democrats win completely and Biden controls the House and Senate. Joe Biden, the 77-year-old US presidential candidate in 2020, has pledged to make sweeping changes to the election campaign. He is a big fan of the green economy, so he is not a friend of industry and mining. Therefore, this issue will affect the metals, mining and steel markets.

    Biden’s regulatory changes are expected to cost the United States $ 1.7 trillion in climate policy and $ 1.3 trillion in infrastructure improvements. These are things that will be great for improving the future of the United States, and will help its sustainable economy. . But US foreign debt is high and needs to be managed. The first way to compensate for this budget shortfall is to raise industrial tax rates. This approach may not be very much in line with the views of American factory executives, and this puts more pressure on the dollar, which is not at all pleasant for the US financial market that trades in dollars, and is a kind of green light to increase global gold prices.

     

    *** Scenario 2: Democratic President, Republican Senate

    In the second scenario, Biden wins the election, but Republicans still control the Senate. Here, Trump’s tax regime is likely to remain, and Biden’s hands will be tied to taxing industry. This scenario may hold the gold and metals markets steady, as changes are less effective and uncertainty is reduced.

    In this scenario, it causes order to return to world politics and, consequently, to the international economy. Because Trump is extremely unpredictable, and one of the reasons for the excitement of the global gold price is his unexpected dealings with other countries’ economies. In this scenario you expect

    That Biden’s presidency will calm the global atmosphere. Biden appears to be easing trade ties with China and lifting various sanctions against foreign countries such as Iran. This will benefit the US stock market, but will likely reduce demand for gold and moderate global gold prices.

     

    *** Impact of macroeconomic indicators on world gold prices

    In an effort to support economic growth and boost employment in the United States, the FED is committed to low interest rates by at least 2023. This means that the value of the US dollar is likely to weaken over the next two years, regardless of who is in charge of the US presidency. This will increase the price of gold in the medium term of two years, but overall these measures are detrimental to the US economy.

    So, if Trump wins, the US dollar will have the least depreciation, if Biden wins with the Republican Senate, the dollar will weaken further, and will grow the most with the complete purge of Democrats.

    Considering all the scenarios, it is not possible to decide with certainty the future direction of the markets and imagine a clear path for them. Because macroeconomic analysis has taken on different dimensions, we can only look at the most probable events. But any unexpected change in the above events will cause the world gold price to rise and the dollar index to fall.

     

    *** Global gold growth in the event of a deviation from the election path

    One of the risks raised in the path of elections is the uncertainties of this path. Anything in this direction is to the detriment of the United States and is likely to push up the price of gold drastically. The price of gold will be in the world. This is difficult to manage under normal circumstances, but since Trump doubts the validity of e-mail voting, this scenario is likely to take hold. This could extend the election of a new president in the country until the end of 2021.

     

    *** World gold awaits election results

    Who will be the final winner on November 3? This is a question that will be answered in a wide range of economic scenarios. In the days following Trump’s hospitalization for Covid-19 treatment, a Reuters / Ipsus poll found Biden the winner of the election, 10 percent ahead of Trump. The Wall Street Journal also conducted a poll after last week’s weak, inconclusive and chaotic debate, which put Biden 14 points ahead of Trump. But a month later, it is too early to decide, and we can point to the last US election and Hillary Clinton’s high score.

     

    *** Examining the debt-to-GDP ratio index

    The International Monetary Fund (IMF) has made a shocking forecast that US government debt will reach 160% of GDP by 2030, indicating that the dollar channel ceiling in Forex trading is empty.

    GDP can be considered the main artery of income of any country. If its GDP is more than its debt, then it can pay its debt and work easily. If its GDP is very low, it is at risk of a debt crisis. The US debt-to-GDP ratio is much higher than reported, thanks to the support of companies and small businesses to fight Covid-19, about two-thirds of US public debt owed to banks, citizens and The companies are large, the rest belong to foreign countries, mainly China and Japan.

    When a country like the United States has low GDP and high debt, it paves the way for rising global gold prices. Because people are worried that the country will move towards a debt crisis. This can happen if creditors, such as China or Japan, demand higher interest rates on their overdue loans to offset the risk of lending to the United States. Therefore, gold buyers want to protect their capital and not enter the game of bank profits and inflationary growth in prices. This will make buying gold attractive all over the world and will lead to its price growth.

     

    *** Bitcoin entry into global transactions

    With rising global gold prices, opportunities have arisen for parallel markets such as digital currencies to attract significant liquidity. It is important to note that gold and bitcoin have behaved similarly in the market over the past year, and there has been a significant convergence between the price of bitcoin and global gold, which analysts should note. If financial markets are uncertain, both of these assets are likely to rise in price. A sustainable economy requires order and calm. In today’s world, it is quite clear that no country is booming, and the United States is in a particularly bad position. This uncertainty and worry has put precious metals in a strong position.

     

    *** Conclusion

    The result of this analysis is that if Biden wins, conditions for minerals and precious metals will become a little more difficult due to the nature of his election promises of a green economy. But his policies are likely to devalue the dollar to create a competitive environment for industry and exports and reduce US debt. This raises the price of gold. If Trump is re-elected US president, his nationalist policies will strengthen the value of the dollar, but the trend of financial The United States will keep the world price of gold high.

     

    Artan Press

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