Why Biden Could Be Good For Gold

Will Joe Biden Trigger Inflation for Gold?

President-elect Joe Biden is expected to increase further government spending. For this and also other reasons, there is a risk that inflation under Biden’s presidency could be higher than under Trump’s. That would be great news for gold.

Not An Easy Presidency To Inherit

Let’s face it, Biden won’t have an easy presidency. And I’m not referring to the fact that he will be sworn in as the oldest president in U.S. history or that he will have to deal with the coronavirus pandemic and the process of vaccine distribution across the country. I’m referring to Biden inheriting an economy with slow growth and too much public debt. Given the debt burden, it should be clear that under Biden’s presidency, real interest rates will remain at ultra-low levels. This is how a debt trap works – the more the debt grows, the less the economy (Treasury) can afford higher interest rates.

Moreover, Biden will have to face the risk of inflation. Actually, some analysts say that the new POTUS could contribute to the rise of prices. Is it true? Will we finally see an acceleration in the inflation rate?

So far, consumer inflation has been subdued. As the chart below shows, the CPI overall annual rate has declined from 2.3 percent before the epidemic to 1.2 percent in October.

Inflation for Gold

The Risk Of Inflation

For some people, this is all really surprising given all the money pumped by the Fed into the economy. However, the disinflation is perfectly in line with our predictions from the May edition of the Gold Market Overview: “In the short run, we expect disinflation, but we think that the risk of inflation later in the future is higher than a decade ago.”

Indeed, in the short-run, the negative demand shock outweighed other factors, and people simply increased their demand for money because of the enormous uncertainty and limited opportunities to spend money in the offline economy.

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Laurent Eliane 4 weeks ago Member's comment

Inflation and fed no move is the worst for retirees, old people. This means there is a good chance they will have to work till they die. Ref. Eastern countries.

This inflation you are praising is the selfish ultimate game for the government to save a capitalism system which is not sustainable. Borrowing what the earth can provide us by many month and borrowing over the limit where interest rate could never be raised because of the total of the debt...this is sure a path for large pain and hyperinflation, collapse, and internal tention.

Just look the history.