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przemyslaw-radomski

How do elections influence gold?

October 19, 2012, 12:00 PM Przemysław Radomski , CFA

Are there any recognizable price patterns that occur right before and after elections that we could profit from?

Generally, the recognizable price pattern that we can expect is the stock market's rally into the elections, as that is what the Powers that Be will want it to do. At the same time commodity prices and - in particular - gold's price is something that the authorities don't want to see rallying, because these declining prices make it easier for them to say that it's ok to fund various politically appropriate programs (i.e. they buy votes) and to fund them with printed money: "Inflation threat? What inflation threat? We have deflation! Gold and commodities are declining, see?"

Consequently, we might expect weakness in metals and strength in stocks. Mining stocks are influenced by both, and this might be one reason for miners' recent strength. After the elections, metals are likely to rally once again - not necessarily immediately, but the uptrend should resume sooner rather than later.

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