Gold hit some of its highest price levels under the Republican President Richard Nixon, but also under Democratic President Jimmy Carter. Gold’s price was at lows under President Ronald Reagan and its lowest in real terms under President Bill Clinton.
If you are wondering whether President Obama or Governor Mitt Romney will be good or bad for the precious metal, forget party affiliation because it turns out to be a popularity contest.
A precious metals expert at HSBC took the historic Gold price data and tracked the price against the US presidents from the Vietnam War era to now.
By overlaying Presidential job approval rating data from Gallup against Gold prices, he has determined that popularity and price are inversely correlated, meaning the less popular the President, the higher the Gold price.
During President Nixon’s tenure, Y’s 1969-1974, he faced the Vietnam War, Watergate, and, ultimately, his resignation. In that period, Gold increased from 42 on the day of his Y 1969 inauguration to $154 oz when he left office, + 267%.
President Carter, Y’s 1977-1981, had the Iran hostage crisis and Y 1979 Crude Oil crisis, causing Gold to rise 322% from the 1st day of his term, $133 to the last $562. In fact, at $850 an ounce in January 1980, the Gold price reached its highest level ever in real terms under Mr. Carter.
So, when Americans are nervous or dissatisfied with its leader, presidential approval ratings go down, and money flows into Gold.
By comparison, popular Presidents keep Gold prices low. Under President Reagan , Y’s 981-1989, the price declined from $562 to $406 oz. Mr. Reagan’s popularity dipped during the Iran Contra affair in Y 1986, which correlated to a rise in Gold prices. President George H.W. Bush’s popularity rose with the onset of the First Gulf War in Y 1990, but steadily declined thereafter around the same time Gold prices were on the rise.
A popular President for most of his term, Mr. Clinton, Y’s 1993-2001 bore witness to Gold hitting an all-time low in real prices of $253 oz in the Summer of Y 1999. And, after his popularity decreased and the price of Gold increased during the Monica Lewinsky scandal in Y 1998.
When George W. Bush entered office, his popularity was high and the price of Gold was low. That changed after 9/11 Y 2001 and as world events worsened and his popularity eroded the Gold price steadily increased.
With President Obama there are highs and lows. Great hope with his election in Y 2008 correlated with low Gold prices.
Obama’s highest approval rating coincided with the lowest price in Gold, which was set the month he took office in January 2009.
That changed in April 2010, when Obama’s approval ranking sank beneath 50% and the price of Gold began its steady rise, which saw Gold tapping an all-time high of 1,895 in September 2011.
Political pundits often work to draw parallels between Presidents Carter and Obama.
Politics aside, a parallel that can be drawn between the 2 is both Presidents Carter and Obama have presided over all time high Gold prices, both in nominal and real terms. At this writing, Gold is around $1,753.50 oz.
Whether it goes up or down after 6 November will not depend on whether a Democrat or a Republican is elected President. Historical data shows that Gold will go down in price whenever a US President is able to increase economic stability, decrease armed conflict, and avoid scandal. And, in that case, we should all vote for the candidate who will prove to be the most popular.
Sources: Presidential job approval data is from Gallup. Gold prices are based on the London Bullion Market Association’s daily PM fix.
Paul A. Ebeling, Jnr.
Paul A. Ebeling, Jnr. writes and publishes The Red Roadmaster’s Technical Report on the US Major Market Indices, a weekly, highly-regarded financial market letter, read by opinion makers, business leaders and organizations around the world.
Paul A. Ebeling, Jnr has studied the global financial and stock markets since 1984, following a successful business career that included investment banking, and market and business analysis. He is a specialist in equities/commodities, and an accomplished chart reader who advises technicians with regard to Major Indices Resistance/Support Levels.