How has the price of gold reacted to US presidential elections?
The following chart plots the average daily returns of gold for the nine days around the US presidential elections (1968-2012). So, the chart covers the period of the 4 days before the election and the 4 days after. For example, for the 12 US presidential elections from 1968 the price of gold has increased on average 0.2% on the day of the election itself (D0).
As can be seen…well, in fact, nothing much can be seen as there’s no clearly discernible pattern of behaviour here.
Let’s now see if there’s any significant difference in behaviour depending on whether a Democrat or Republican wins the election.
The following chart plots the average daily returns for gold for the election day and four following days. The averages are split as the average for the five times a Democrat has won compared to the seven times a Republican has won.
For example, in the five elections that a Democrat has won the White House, the average daily return of gold the day following the election (+1D) has been 1.1%.
Generally, the price of gold has been stronger following a Democrat win, and especially strong on the day following the election.
Let’s now zoom out time-wise and look at gold’s month returns around the elections.
The following chart shows gold’s average month returns for the three months before, and three months after, US presidential elections.
Historically, the gold price has been weak in the month leading up to the election (-1M) with an average month return of -1.8%. Following the election the price has tended to bounce back, with an average return in the following month of 1.1%.
The following chart plots the proportion of months seeing positive returns in these six months around the election. For example, the price of gold has only risen four times in the month before an election in the 12 elections since 1968.
This chart largely supports the the observation in the preceding chart which is that the price of gold is weak in the month preceding an election, and strong in the following month.
Now to see if there is any difference in the behaviour depending on whether Democrat or Republican wins the White House.
In the month following an election gold has risen on average 1.7% if a Democrat won, and 0.7% if a Republican won. The performance differential becomes more pronounced in the second and third month after the election – with gold seeing month returns of over 4% in the case of a Democrat win, and negative month returns in the case of a Republican win.
Caveat: this analysis involves a very small sample size (there have been just 12 elections since 1968) so the results can not be regarded as statistically significant. But, given that caveat, it does seem that gold loves Democrats!