How will the U.S. elections impact the price of gold?

The election will likely have little to no impact on the price of gold. At the most, we might see some jumps up or down, depending on the sentiment of investors just after election day.

To put too much emphasis on the election results makes the mistake of assuming that gold prices are driven by the White House or even Congress. They are not. Or, to be more accurate, they could be, but they won’t be.

If Obama gets back in, nothing much will change. If Romney and Ryan get in, there will be some changes, but they are unlikely to be significant enough to make a big difference to gold prices in the near future.

Why not? Because the fundamentals that influence gold prices will only shift if they are impacted by some very dramatic and consistent changes. And it will take more to shift those fundamentals than a change at the White House.

Even if the Republicans win, and Paul Ryan’s “draconian” cuts in government spending are voted in, the Congressional Budget Office estimates that this will not balance the budget until 2040. And beyond the budget, there is the separate challenge of paying down America’s $16 trillion federal debt. How long will that take?

In other words, even if substantial changes are made at the top, the short-term impact on the fundamental problems facing the U.S. economy will not amount to much.

Meanwhile, whichever party gets in, it will be business as usual over on Wall Street. The vulnerabilities of the financial system are still there, and are unlikely to change, regardless of who is in the White House.

And, of course, the U.S. election results will do nothing to change the economic problems being faced over in Europe, Japan, and even in China.

Remember, the global economy is connected. What happens on the other side of the world impacts our economy over here.

It is these larger, international factors that move the price of gold. Yes, the price of gold jumps up and down a little during the course of any given week or month. But longer-terms shifts are driven by more deeply anchored fundamentals. It’s the big shifts that make a difference, not the sound bites from the White House or Congress.

That’s why smart buyers of gold generally ignore the events of today and next week, and focus instead on the long view.

About the author: DH Kenrick is a student of world economics and a committed gold enthusiast. Follow me on Google+

Like Owning Gold on Facebook