Saxo’s Ole Hansen suggests the run-up in precious metal prices is partially due to concerns that a single party winning in the U.S. election could bring increased government spending
Saxo Head of Commodity Strategy Ole Hansen said in a note released Tuesday that precious metals outperforming through October could be a result of worries surrounding government spending if a single party were to gain control of both the White House and Congress.
“Besides continued worries about a further deterioration in the Middle East, we conclude that this strength is increasingly being seen as a hedge against a potential ‘Red Sweep,’ where one political party controls both the White House and Congress,” he said. “This scenario raises concerns about excessive government spending, pushing the debt-to-GDP ratio higher, while fueling inflation fears. Investors are turning to precious metals as protection, even as expectations for lower rates and easier financial conditions fade, as highlighted by the four key charts tracking this exceptional divergence.”
Hansen also noted several drivers of the bullish movement of gold and silver, including safe-haven demand, geopolitical tensions and de-dollarization driving strong demand from central banks.
Hansen said these moves have been confirmed by significant inflows into Western gold-backed ETFs, which had previously been experiencing outflows until May of this year.
