Inflation is Coming. Gold is the Perfect Hedge.
US Election is A Green Light for Gold Bugs.

To put things bluntly, the junior gold space is not faring well this week. Gold prices have been hit hard and a broader equity market sell-off has only added fuel to the fire. The chart below is a visual representation of US equities daily performance on Wednesday.  In any case, it is nice to know that gold stocks are not alone in this sea of red and as history goes, this is usually the case in the week leading up to a U.S. presidential election. The 2020 U.S. election is particularly interesting for obvious reasons; one of them being President Trump’s refusal to give up power, if he were to lose. Looking at the markets and polls unbiasedly, it seems the market is bracing for a Biden win.
UBS and Goldman Sachs have both told their clients to prepare for a likely Biden win and a subsequent fall in the USD by buying gold. It seems the market is still also cautiously noting the possibility of a Trump win. There was a broad market sell off at the beginning of the week but volumes have begun to dry up, meaning investors are hesitant to buy stock so close to the election, but they are also hesitant to sell. <% {"name": "BoxSeenNews", "newsHeadline":" The Lithium Boom is Back", "link": "/news/lithium-boom-back"} %>
Regardless of a Trump or Biden win, it seems gold bugs stand to benefit as there is likely another stimulus package in the works. A stimulus package means printing more money, printing more money leads to inflation, and rising inflation is a positive indicator for gold prices. Below is a chart which shows the M2 money supply in the U.S.  Since the start of 2020, the money supply has ballooned to unprecedented levels.
Normally characterized by slow, steady growth, the M2 supply has grown 20% from $15.33 trillion at the end of 2019 to $18.3 trillion at the end of July. Morgan Stanley chief U.S. equity strategist Mike Wilson had this to say: “The risk of higher inflation may be greater than it's ever been, too. While this hasn't shown up in back end rates yet, the very sharp move higher in breakevens \[bond market inflation expectations\] and precious metals suggest higher inflation may be on its way." Given their relative price stability over time, gold and silver are both a perfect hedge against inflation.
That seems to be the view of many fund managers, central banks, and legendary investors such as Warren Buffett, who have all made significant investments in gold in the last year. After years of trashing gold as an investment, Buffett’s Berkshire Hathaway Inc. revealed this year that it had switched course and purchased 20.9 million shares in Toronto-headquartered Barrick Gold Corp. in a transaction worth an estimated US$563.5 million.





