Precious Metal Prices Under President Biden

It has been a few weeks now since Joe Biden was sworn in as the 46th president of the United States on 20th January, in what was a scaled-down inauguration ceremony due to the ongoing coronavirus pandemic.

With Biden’s feet now firmly under the White House Resolute desk, he will be tasked with improving what is a weak dollar, especially in terms of GBP to USD. Aside from currency strengthening, traders will be wondering what the future will look like in terms of what the outlook will be for precious metal prices.

Following on from what was a particularly impressive year for precious metals, could we be set to witness further impressive gains – or should investors be more cautious about the prospects, as world economies slowly begin to recover from the coronavirus?

What happened in 2020?

Last year will go down as one of the most memorable in modern history, with millions of deaths from the novel coronavirus, the near closing of the world’s largest economies, and some of the strictest lockdown measures ever imposed on western society.

However, it was not all doom and gloom for investors, particularly those trading on precious metals, with gold prices hitting all-time highs in 2020.

Indeed, the price of the yellow metal experienced a significant rise in value last year, trading at more than $2,000 per ounce, reflecting its status as a safe haven metal.

Meanwhile, the demand for silver has been on a consistent increase since the start of the coronavirus pandemic back in March 2020, while supply disruptions supported the price of silver.

In general, precious metals strengthened in 2020, amid many months of uncertainty and through robust demand from investors.

The Biden Effect on Gold

With Joe Biden now installed as president, the expectations are that gold prices will be higher in the longer term, as the Democrats look set to offer greater stimulus and preside over large budget and trade deficits.

As a result of this, prices for the yellow metal should demonstrate a positive trend during Biden’s presidency, as increased stimulus and deficits are likely to accelerate the reasons for investors turning to gold as an asset.

With President Biden placing green spending plans high up on his agenda, and the risk of inflation being a very real possibility, gold prices could rally as price rises build up momentum.

This is because gold is a common inflation hedge metal in the long term, typically increasing in value as the dollar loses its purchasing power.

The Biden Effect on Silver

Market analysts say silver’s dual role as a safe-haven asset and an industrial metal, along with its greater volatility, could mean that is fares even better than gold, as usage could increase significantly on the back of President Biden’s ambitious clean energy plans.

In an increasingly unpredictable and uncertain world, it is difficult to consider the impact a Biden Presidency will have on silver prices.

However, what is guaranteed is that climate change, renewable energy and clean air plans will feature much more prominently in the US policy and decision making, compared to the Trump Administration – to the benefit of silver.

With silver being a core element in the manufacturing of solar panels, prices of metal could be set to rise sharply, if President Biden follows through on his promise to install 500 million solar panels in the next five years.
Goldman Sachs predicts that solar installation will increase by 50 per cent between 2019 to 2023. This is very likely to lead to a great surge in demand for silver, due to it being one of the key components in the production of the panels.

And after pledging early on in his election campaign to re-join the Paris Climate Agreement on “day one” of taking office, President Biden has signalled his intent on the matter, and investors will be watching closely during the early days of his administration.

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