Loaded for Bear: expect a surge of demand for gold coins in US if Harris wins White House race

Sources: Bloomberg, US Mint, World Gold Council.

By Ed Stoddard

12 Aug 2024

US Republicans, especially the far-right fringe elements of the flock that have taken centre stage under Donald Trump, are wild about gold. This is especially the case if a Democrat wins the White House.

Predicting market and demand trends can be a mug’s game, but here is one I feel pretty confident in making.

If Democratic Party nominee Kamala Harris beats Republican Donald Trump in November’s US presidential election, there will be a surge in demand for gold coins in America.

I base this forecast on data compiled by the World Gold Council, which recently released a report on the effect of US elections on gold.

The most pronounced trend to emerge from the data is the rush to buy gold coins if it looks like a Democrat will win the White House, a buying spree that continues apace if that scenario pans out.

“Historical data suggests that the sale of gold coins via the US Mint tends to spike in anticipation of a Democratic victory,” the report says.

“... in any given month the average volume of ounces in gold coins sold to authorised purchasers via the US Mint is roughly 60,800 ounces. However, during the month of an election in which the Democrats win, this figure has risen on average to 86,400 ounces, compared with 71,000 ounces for Republican victories over the past 37 years.”

The real scramble

That is an over 42% rise on the monthly average in the month in which the Democrats win the White House. And then the real scramble begins.

“... this pattern extends beyond the election month. Over the 12 months post a Democratic win, the average monthly volume sold is roughly 79,000 ounces compared to a mere 32,500 ounces observed after a Republican victory,” the report says.

A chart showing gold-buying trends under Republican and Democratic governments in the US. (Sources: Bloomberg, US Mint, World Gold Council.)

So when a Republican wins the presidency, such sales fall below the monthly average over the next 12 months, but surge when a Democrat secures the White House. Such sales account for about 5% of global demand, so don’t really move the needle much for the price.

But it’s an interesting case of how asset demand can be politically driven, and while the specific data in the report is focused on coins, Republicans are seen as significant buyers of gold bars, which account for about 17% of global demand.

“Anecdotal evidence indicates that retail bar and coin buyers may be Republican leaning. This could partially explain the increase in demand around the election, particularly when a Democrat wins,” the report says.

On this front, while the evidence may be anecdotal, it is also quite overwhelming.

Gold Standard

US conservatives and Republicans have long been wild about the precious metal, and many are fervent backers of bringing back the Gold Standard, which Richard Nixon abandoned in 1971.

The late conservative firebrand Rush Limbaugh used his radio show to promote gold coins as a store of wealth, and right-wing agitator Glenn Beck has hawked the coins.

“Project 2025”, an extremist policy document drawn up by the right-wing Heritage Foundation to guide another Trump term, pointedly calls for a return to the Gold Standard, which would link the value of the US dollar to bullion reserves.

This would fix the exchange rate and allow the greenback to be freely converted into gold. And the gold coins that conservative Republicans are so taken with could be used as currency under such a system.

Like so much of the Make America Great Again agenda, most economists see this as simply bonkers.

It’s true that gold has been on an absolute tear and its price is near the record highs of almost $2,500 an ounce that it scaled last month. This has been driven by mostly emerging market central bank purchases as such portfolios diversify away from a reliance on the US dollar, as well as gold’s “safe-haven” status in times of rising geopolitical tensions and uncertainty.

But like all commodities it is subject to speculative booms and busts, and is hardly a stable anchor for monetary policy.

Conservative backlash

Part of the conservative backlash to the status quo is an objection to the US Federal Reserve’s power to craft monetary policy by setting interest rates in response to inflation. This is seen as an example of “Big Government” in such circles.

And while the Fed doesn’t always get it right – there are current concerns that it has waited too long to cut rates and the US economy may be tipping into a downturn – a return to the Gold Standard is simply magical thinking.

This, I think, is part of the appeal.

I mean, Trump supporters clearly engage in “magical thinking” if they believe a transparent con artist has been sent by God – as many do – to save America from the leftist hordes.

This also explains why conservative Republicans trigger a rush for gold coins when a Democrat wins a presidential election. If you believe Kamala Harris is a far-left Marxist about to impose tax-and-spend policies that will unleash inflation, then gold coins are your hedge.

It’s similar to the reason why gun sales surge in such a scenario: the fear that Democrats are going to come for your arsenal.

It must be said that not everyone who regards gold as a store of wealth or investment option is a far-right extremist or Make America Great Again cultist. But conservative Republicans tend to be gold bulls, and a Democratic White House victory is a red flag that they will charge.

And since President Joe Biden dropped out of the race, Harris – the current US vice-president – has roared into a lead over Trump, according to a number of polls including in key swing states that are seen as the path to victory.

The election is almost three months away, but it looks like the sale of gold coins is set to fly in the US. DM

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