Biden Pulls out of the US Election Campaign: Possible Impact on the Gold Price

On July 22, 2024, President Joe Biden announced his withdrawal from the US election campaign. This decision was made under increasing pressure within the Democratic Party and due to health concerns, that called into question Biden's ability to run for a second term.

While this news could destabilize the markets for the time being, the recent assassination attempt on Donald Trump has drastically changed the dynamic. On July 13, 2024, Trump survived an assassination attempt during a campaign rally in Butler, Pennsylvania. This incident boosted Trump's popularity and his chances of election. His supporters see him as a figure who stands up for his beliefs despite adversity and danger, which significantly strengthens his position in the election campaign.

These events have also affected Kamala Harris' chances of election. Although she is supported by Biden, she must win the trust of the Democrats and stand her ground against a now strengthened Trump.

While the assassination attempt on Trump on July 13, 2024 already influenced the gold price and led to an increase of around 1.5%, the markets reacted to Biden's withdrawal with a further 2% increase in the gold price. These reactions reflect the increased demand for safe investments in times of heightened political uncertainty. Investors increasingly sought safe havens such as gold, as both the assassination and the political change brought considerable uncertainty and risks to market stability.

President Joe Biden's withdrawal from the US election campaign has triggered immediate reactions on the financial markets. According to Josh Thompson, CEO of Impact Health USA, and Michael Collins, CFA and founder of WinCap Financial, this decision will lead to short-term volatility as uncertainty arises over future US economic policy. Analysts expect that equity markets could fall in the short term as investors dump risky assets and pursue more conservative strategies. The S&P 500 and other major indices could see fluctuations as markets try to digest the impact of the political change.

At the same time, investors are increasingly looking for safe havens such as gold. Peter Earle, Senior Economist at the American Institute for Economic Research, emphasizes that gold has traditionally been seen as a hedge against uncertainty and economic turbulence. The market for precious metals often reacts positively to political instability, which is reflected in increased demand for gold.

In response to the increased volatility, investors could diversify their portfolios to spread risk. In addition to gold, government bonds or defensive equity sectors such as utilities, healthcare and consumer staples could be considered, as these tend to remain more stable in times of economic uncertainty. Another strategy could be geographic diversification to reduce risks associated with political uncertainty in the US. Markets in more stable political environments could be seen as more attractive alternatives.

Biden's withdrawal from the US election campaign could weigh heavily on the US dollar and therefore also have a direct impact on the gold market. The uncertainty created by his withdrawal could weaken confidence in the dollar. A weaker dollar makes gold cheaper for foreign investors, as they have to spend less in their own currency for the same investment. This could increase the demand for gold and cause the price of the precious metal to rise further.

Uncertainty about the current economic and political stability of the US could lead international investors and institutions to withdraw from dollar-pegged assets and invest more in gold. Historically, investors tend to turn to gold as a safe haven in uncertain times. The increased demand for gold could cause the price of gold to rise further, while the dollar could come under pressure, leading to a global market shift towards precious metals.

The long-term effects of Biden's withdrawal from the US election campaign will only gradually become apparent. The uncertainty created by this political change could cause continued volatility in the markets. Investors may be forced to adjust their investment strategies to hedge against potential risks. Gold could play a key role in this context, as it is traditionally seen as a safe investment in uncertain times.

The price of gold can be heavily influenced by abruptly changing political landscapes and unexpected global events. Biden's withdrawal could exacerbate such uncertainties, especially if political and economic conditions change rapidly. Such changes may lead to increased demand for gold as a hedge against potential risks and uncertainties. At the same time, other factors such as new economic developments or international events could also influence the price of gold. It is therefore important for investors to regularly review and adjust their investment strategies.