The gold price may be done correcting for now, but what will happen when the results of the election are known? Daniel Oliver of Myrmikan Research warns that the U.S. could be going down the same path as Argentina during its days of economic distress and social unrest.
He also had some insight into what could happen to the gold price in the case of a Democratic and Republican presidency and Senate. Additionally, he had a chilling warning about what could happen if one party gains complete control over the government.
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A warning about Argentina
Oliver warned that if Democrats take the presidency and the Senate and retain control of the House of Representatives, it would cause a concentration in power that the Constitution was designed to prevent. He expects the presidency and Senate to go together in the election.
In the event of a concentration of power toward the left, he said the U.S. government will look more like Argentina than Switzerland. He also questioned why America's fate would be any different than what happened to Argentina since it "embraced Peronist populism."
Gold if Democrats win the election
If Democrats win the election and especially take both the presidency and Senate, Oliver expects the gold price to soar. He said if the pendulum swings all the way to the left, it means even more money printing than what has already been going on with a mixed government.
He noted that Joe Biden and Kamala Harris are promising a $7 trillion spending problem. That doesn't include the trillions in additional stimulus to deal with the pandemic, which he believes "will include bailouts of urban centers turned into war zones by Democrat mayors and governors) or reparations."
Oliver also noted that Democrats want to fund their "mad spending" with taxes partially. Biden wants to increase income taxes, corporate taxes and taxes on capital. However, he said federal, state and local taxes are already so high that he believes higher taxes may not boost tax revenue much.
"In short, the economy must suffer (as it did under the New Deal), and the deficit will explode further," he wrote. "The Federal Reserve will be forced either to monetize the spendings [sic] or watch as soaring interest rates cause the financial system to implode along with the state's ability to finance itself. The credit bubble that has been growing since 1971 (or 1933, depending on how you count), will crash onto the rocks of progressive politics."
Gold if Republicans win the election
Oliver said if President Donald Trump pulls out a surprise victory in the election, the gold price could plunge, just as it did after the 2016 election. That happened against expectations.
While he denounced "left-wing populism," he also said that Trump "has his own populist streak" because he likes high tariffs, cutting taxes, increasing spending and "a central bank that prints to fund internal improvements and a rising stock market."
"The precious metals offer safe haven from the approaching political and economic turbulence," Oliver wrote. "After a relatively brief correction, gold and silver have resumed their climb."
He added that if the market demands that the dollar be backed on-third by gold like it was between the 1690s and the `908s, gold would need to trade at $8,927 an ounce. On the other hand, if the Federal Reserve is forced to back its liabilities by two-thirds, which he said would be more appropriate for a crisis, the gold price would have to rise to $17,854 an ounce. Further, as the Fed's balance sheet grows, these numbers for the gold price will increase.
"Given the economic and political risks, $1,900/oz is a bargain," he declared."