Challenge to Democracy Hits Dollar, Boosts Gold

The President of the United States claiming the national election is illegitimate, alleging “they’re trying to steal an election. They’re trying to rig an election,” but offering no proof. In an historic pronouncement, two days after Election Day, while the votes were still being counted, President Donald Trump challenged the legitimacy of the democratic process that is foundational to America. To a world that has viewed America as a bastion of democracy for more than two centuries, the president’s false attacks can only erode confidence in the United States of America. And, so, the U.S. dollar continued its recent decline.

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On the morning after the president’s complaints, as his attorneys attempted to challenge the electoral process in key states, the U.S. Dollar Index, which measures the dollar against a basket of major foreign currencies, fell to its lowest level in more than two months, down 2 percent from where it stood just before the election—a very substantial drop in just three days. During the same three days, gold surged 3.5 percent.

A falling dollar tends to be positive for gold. The precious metal is priced in dollars around the globe so a drop in the dollar makes gold more affordable in the largest precious metals markets, which are overseas.

Beyond the president’s rhetoric, some analysts say the apparent results of the election will extend the negative trend for the dollar, which has bullish implications for gold.

“I do think the mix of a Biden presidency and Republican control of the Senate is deeply negative for the dollar,” Marshall Gittler, research head at BDSwiss, told Reuters. 

Without democratic control of the Senate, it would be difficult to approve a large fiscal stimulus bill to support the U.S. economy.  

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