Post-U.S. Election: What does the future hold for Gold, Bitcoin, and Stocks?

Welcome to the Newsletter: Insight into Finance, Investments, and Precious Metals

In these uncertain times, it's crucial to stay cautious and proactive in managing your wealth. Protecting your assets in the coming period is key. Together, through news and more in-depth information, we can help you make informed decisions under all economic conditions.

General Overview

• Donald Trump has been elected as the 47th President of the United States.
• On Thursday, the Fed lowered interest rates by 0.25%, following a significant 0.50% reduction in September. With this latest cut, key interest rates are now in the 4.5–4.75% range.
• The S&P 500 has set 50 record highs this year, surpassing 6,000 points for the first time in history.
• One of the largest inflows in mutual fund history has been recorded.

Bitcoin reached a new all-time high, exceeding $80,000 for the first time.

• Gold saw a correction after achieving 41 new records in 2024, followed by a similar move in silver.

Whether Trump will succeed in "making America great again" remains to be seen. However, it is already evident that his victory has had a short-term positive impact on various asset classes. How long this impact will last is a big question, as the election campaign did not address critical issues like the budget deficit, inflation, labor market conditions, etc. Instead, it focused on internal U.S. political matters.

Trump's policies could also present some long-term challenges, especially a potential resurgence in inflation, which has recently approached the target of 2%.

One possible future problem…

"Shadow banks" now control approximately 50% of global financial assets

• These are financial institutions, such as hedge funds, investment funds, and private equity, that operate outside regular banking regulations. Unlike traditional banks, they don’t take deposits but offer credit and other financial services.
• If shadow banks, now managing half of global financial assets, face problems, it could have significant consequences for the broader financial system.

Stocks Again at Record Levels

• The S&P 500 index saw the largest single-day gain following the election in history.

Buffett Indicator Signals Record Overvaluation of U.S. Stocks

• This indicator measures the ratio of the market capitalization of all U.S. stocks to gross domestic product (GDP). When this ratio is high, it suggests that stocks are overvalued compared to actual economic output.
• The question of whether GDP will grow enough to balance this ratio is crucial.
• If the U.S. economy grows significantly, an increase in GDP could help achieve a more balanced ratio.
• If GDP growth isn’t fast enough, stock markets may remain overvalued, potentially leading to a correction.

Forecast of a Lost Decade?

• Lost decades, during which stock markets experience prolonged declines and stagnation, occur in times of economic crises, high long-term debts, inflation, or inflated market bubbles.
• Such periods can be very challenging for investors, as growth is very slow and values decline repeatedly.

The Wealthiest Keep Getting Wealthier

• The ten richest people in the world increased their wealth by $64 billion on Wednesday after the election results.

Bitcoin Reaches New All-Time High

• Bitcoin reached a record value exceeding $80,000, amid expectations that Trump’s election would lead to less restrictive regulations for digital currencies.
• The prospect of the U.S. becoming the "global capital of Bitcoin and cryptocurrencies" led many investors to increase their investments, driving rapid price growth.

How Did Gold React to Trump's Previous Election?

• In 2016, gold and silver initially surged due to uncertainty over Trump’s victory, as investors sought safe-haven assets during volatility. Soon after, both metals reversed course as markets absorbed the news, and optimism about pro-business policies led to a rise in stock markets.
• A similar dynamic seems to be occurring today, as precious metals react strongly to political and economic uncertainties.
• Both events underscore how quickly market sentiment can change, especially in precious metals, as investors weigh broader economic impacts and potential policy shifts.
• When volatility settled, gold surged by 67% during Trump’s first term, from $1,200 to $2,000 per ounce, an average annual growth rate of around 14%.
• If this trend continued, a gold price of around $4,500 per ounce by 2028 would be entirely achievable and realistic.

Gold’s Price Movement After Elections

• Take a look at how gold has behaved under previous presidents.👇

Gold Remains a Key Commodity for Russia

• Russia’s Ministry of Finance will allocate 87.5 billion rubles ($900 million) in oil and gas revenues next month for purchasing gold and foreign currencies, approximately 4.2 billion rubles ($43.2 million) per working day.
• This represents a 35.5% increase compared to last month’s spending on gold and foreign currency purchases.

Gold Remains Key for Global Central Banks

• This year, global central banks purchased 694 tons of gold, the third-highest amount in recent decades.
• Since 2022, central banks have acquired 2,825 tons of gold, twice the average seen before the 2020 pandemic. This increase is driven primarily by countries like China, India, Turkey, and Poland, which have significantly boosted their gold reserves.
• This demand has pushed gold prices to 41 record highs this year.
• This shows that central banks see gold as crucial protection against uncertainty, as they strive to stabilize their economies.

Which Country Has Bought the Most Gold?

• The strong appetite for gold among countries further impacts its rising price.
• The table below shows a list of countries that have most increased their reserves between 2015 and 2024.

Silver Among the Best Investments of 2024

• Silver is among the top-performing assets at the end of October 2024.

Silver-to-Gold Ratio

• The silver-gold ratio (SGR) indicates periods when silver outperforms gold.
• This chart now shows signs of readiness for a historical rise, which could represent a once-in-a-lifetime investment opportunity in precious metals.

"Thanks for Silver"

• As with all investments, capital and investments constantly shift from one side to another. An investor with "weak hands" refers to someone who sells investments too quickly at the first signs of market drops or instability, lacking long-term pressure or patience in investing.
• Silver, too, will continue to test investors. Would it be better to buy now rather than at 500% higher prices?

Wishing you wise investment decisions and a prudent outlook for the future...

With our assistance.

Best regards,

Peter

The opinions and analyses cited are educational and do not constitute financial advice. I do not endorse or recommend any investments based solely on the above information and recommend consulting a qualified financial advisor beforehand. Investors must consider their financial situation, investment goals, and risk tolerance before making any decisions. I am not responsible for any investment losses that may arise from using this information. For in-depth advice, I recommend consultation via peter.herman@valores.si