Presidential election uncertainty is going to continue to impact all markets, including gold, said David Erfle of JunioMinerJunky.com. Here's all the risks to look out for.
David earthly of junior minor junkie.com is here to talk about election outcomes impact on the price of gold David. It's so good to see you again, as you know, last time in 2016, the price of gold fell following Trump's win the question on everyone's mind this year is what will happen to gold either way.
That's a great question, David. Thanks again for having me on, uh, the last election. Uh, we had, uh, the minors leading gold lower into that election. So, you know, the miners are, are, uh, are, are a predictive indicator a lot of times in the, in the, in the sector. And that cause as they lead the metals in both directions, but, uh, you know, and last time we have a lot of similarity similarities with the last election as well.
We had, um, Hillary Clinton. Way ahead in the polls. Um, everybody expecting a Hillary Clinton win, and then we had Trump, uh, have that pull out that huge surprise victory and, uh, the gold price really tanked. So, um, but also there's a lot of differences between, uh, that last election in this one. Um, During the last election that the gold price was in the process of what would become a huge sicky six year base before breaking out.
And now that we've had that breakout, um, we also do not know, um, once we do have, uh, an election results will either side except the election result. You know, there's been, there's been a lot of rhetoric from both sides saying that will not accept the outcome due to the due date. The hot potato of the male end, um, election of votes.
So a lot of these male and votes, um, uh, Trump has come out and said that the elections basically rigged and he won't accept the result. And I know that we've had. Hillary Clinton advise on the other side to Biden, not to, not to, uh, not to, uh, make an, make a concession speech if he loses the election. So I would not be surprised to see the volatility in the gold price continue long after the election result is, uh, has been cast.
Because we might not even know who the president is until December or January, and it might not be my night, not be decided until it goes through a Supreme court decision. So lots of uncertainty during this, this a lot more uncertainty during this election. I think one of the central trends last time in 2016 was a strengthening dollar.
In the first month after Trump was inaugurated and that's what caused gold to fall. Now, this time I've talked to several analysts and the consensus, it seems to me that stimulus is going to happen either way. If Trump wins, we're going to get stimulus. If Biden wins, we're going to get possibly even more stimulus.
Both of these outcomes would weigh down on the dollar, which may bring up gold prices. What do you think. Well, I think the market's pricing in a blue wave here already, so that might already be priced in. We really don't know. Um, and bringing up the dollar. If you take a look at, uh, at the longterm chart of the dollar it's uptrend from it's low in 2011, Was it broken, um, when gold price got above 2000 and now that downtrend, that uptrend line has been back-tested and is reversed.
Well we're, you know, this stimulus has become a real political football here and the gold price has been very schizophrenia since last year. When, when Trump pulled the flip flops saying that he would not negotiate until after the election and that a few hours later coming out saying, we need to go big.
So, and you know, we had, um, Pelosi come out earlier this week and, and, and say, you know what, even one 81.8 trillion is not enough. So we don't want to negotiate anymore for the rest of this week. So it's become a real hot potato of the stimulus. So, um, and meanwhile, the gold price continues to vacillate around the 1920 level, which is a very key level.
David. This is, this is the price that gold brand too, during the parabolic decline, I mean a move higher in 2011, when it hit 1926. 20 to 1925 area. So that, uh, level is, is a very key level here and it's back tested it and got above it this week. And now it's gone back below it. And, um, it's just, it's, it's very difficult to be a trader right now.
The 2011 high was very briefly sustained. You think we're going to see a major pullback into another bear trend like we saw in 2011. Yeah, that's that's a great that's. That's that's that's the million dollar question right now is that 1850 level going to hold or is the eight, 1750 to 1800 level going to come into play.
And if you take a, take a big step back and look at the monthly chart of gold, it's still very overbought. And move down to that 1750 1800 level would actually be, be very healthy for the longer term bull market. And that 200 day moving average now has creeped up over 1750. So if we do get some more chop here and, um, if the gold price moves is the, we see a, a close below 1865, then I think that might usher in that 1800 level.
Then on the, on the upside, I'd like to see a close above 1950. Okay, let's go back to the election now and talk about one of the key drivers, the gold price, which is inflation. Can you break down what you think will have an inflation? If let's say Trump wins versus a Biden victory. Well, I think it's more like patient expectations.
You know, the, uh, the, uh, inflation affectations would, would be what would be higher if there was, if there was this blue wave victory everywhere we had the house, the Senate. And the white house all taken by the Democrats, um, which is what the polls are showing pretty much right now. But so we don't really, we can't really put a lot of faith in those polls.
David is like, uh, in 2016. So, um, I think, uh, inflation expectations would ramp up higher if, if, if the Democrats would sweep and you'd also see that the CR the CRB index. Spike higher. Okay. So if the markets are already pricing in a blue wave victory, let's suppose Trump wins and catches everyone off by surprise.
What's going to happen to the dollar. What's going to happen to gold right away. I think, uh, the only way I think you'd see a strong move, lower in the gold price, but only if it w if it was not contested. If, if, if, if they basically, they pretty much came out and, and conceded right away, just like Hillary Clinton did during the last election.
But I really don't see that happening. I mean, this, like I said, this, this in voting, uh, situation is become a real hot potato. Now you mentioned something really interesting at the beginning of the interview, which is that mining companies are a leading indicator for gold prices. Now, personally, I've never heard that before.
I've always known that they've had, they've had a, a strong correlation with each other, but never that mining companies lead gold prices. Can you explain how that works? Oh sure. It's uh, the minor action, um, usually leads the, the gold price. And, and usually if you see, if you see silver leading and the miners leading, uh, the gold price higher, that's a, that's, that's a very bullish situation.
Um, and it goes, and it goes the opposite, uh, in, in a down move. Um, the miners usually, uh, take control on the, on the upside or the downside to lead a trend. And you would think that the gold bullion is more heavily traded than gold mining company. So why is it that investors will be moving gold miners?
First before the bullying. Well, the stock market's a forward leading indicator, um, and a smart money. We'll get, we'll get into the minors when they realize that that goal is about to make a strong move. So, David, then why do you think that gold mining companies have a high beta to the bullying? In other words, if gold goes up 1%, a gold mining company would go up to three.
Where many times that number, why do you think this leverage exists? Yeah, that, that, that leverage exists for the same reason. Um, you know, um, w we're about to, we're about to see, uh, two, three financials come out in the mining stocks here in a couple of weeks, and the gold price has average $1,911 and two, three.
So I, you know, the market's going to expect, uh, some, some very large profits from, from these, uh, from, from these major mining companies and also they're going to be raising their dividends. So I wouldn't be surprised to see the, the minor start to move up before these. These, uh, earnings reports are released.
What are expectations in the mining company prices telling you now about expectations for gold prices? Yeah. Well, I mean, a lot is still hinges on this selection. As I stated earlier, you know, the gold, market's very schizophrenic here. We can't have, we, we're not getting any follow through on, on the downside or the upside here.
And it's frustrating traders for the short term. I think it's, it has a lot to do with the election. It has a lot to do with, um, With, um, the, uh, how the election is going to play out in terms of, is it going to be a, uh, uh, a, uh, a safe transfer of power, a normal transfer of power, or will it be contested? So, um, there, there's, there's just a lot of different things happening right now that complexion, uh, control the gold price on both on, on.
On the upside or the downside. So we're getting a lot of chop here. We're getting a lot of schizophrenia. Perfect. All right, David, hopefully thanks very much for coming on the show today. I appreciate it. Anytime, Dave, thanks a lot for having me. Thank you for watching. Kick go news. We'll have much more for you.
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