The presidential election held to pre-election polling form on Tuesday (November 4) evening as Barack O’Bama carried all of the states expected and stole a few states won by President Bush in 2004. The election has already impacted investors who were in a hopeful mood leading up to the results on Tuesday. Investors pushed the Dow higher by 305 points on Tuesday. Many experts are anxious to find out how the election results will affect investors. Traditionally, Wall Street has been buoyed by republican victories based on the perception that the conservative party is the pro-business party.

Much of the election results were based on disappointment in the economy. Earlier in the election campaigns, Americans suggested the Iraq War and foreign relations were key issues. However, exit polling Tuesday showed that the economy was central in the mind of most voters. In fact, about 60 per cent of voters named the economy as the main influence on their vote. Most analysts had correctly predicted that the economic challenges faced by the Bush Administration would contribute to an O’Bama victory.

With all the economic news impacting the election and taking the forefront in recent weeks, gold has managed to slide down in value with little fanfare. Much was made of the gold rush that pushed the commodity over $1,000 per ounce for the first time ever earlier this year. Little has been made of its near-term slide that has produced a current gold spot rate just below $760 per ounce.

Despite the recent downward trend in gold, goldmoney.com founder and President James Turk still says that gold is on a long-term upward trend based on charts against every major foreign currency. Most analysts agree that recent dip in gold is mainly due to the surge of the dollar against other currencies. The dollar and gold rate have moved inversely as a rule. When the dollar is strong, gold tends to fall.

The US maintains one of the world’s largest gold reserves, but it is not a leader in natural gold production. This is why a strong US currency contributes to less value for gold. Many people view gold as “safe currency”. Gold is a rare commodity that holds much of its value has a holding reserve compared to most natural resources that are valued based on their use in manufacturing and development.

Turk has been saying for some time that gold could move as high as $8,000-10,000 per ounce by 2013. This number sounds astounding but Turk believes gold has a lot of catching up to do to overcome the gap between inflation and the rise in gold value since it began floating against the dollar.

The economic situation in the US following the election of O’Bama is likely to impact the movement of gold. Based on recent developments, a stabilized economy would probably improve stocks and the dollar and cause cautious investors to pull money out of gold speculation and move it back to more risky equities.

Compared to where the gold rate was earlier in 2008 (around $1,020), the current spot rate of $759 seems harsh. It is important to consider, however, that this value is not too far off where the all-time high was prior to the run above $1,000. Trend lines do seem to show a medium-to-long term upward direction for gold. Time will tell if economic events affect the graph trend lines.

Market Recap

Stocks were eerily flat on Monday. After weeks of wild swings, The Dow dropped 5 points, the NASDAQ gained 5, and the S&P was down 2. Weak manufacturing data was the day’s biggest news. Oil prices dipped. The big news comes with Tuesday’s election for 44th US President. An election day rally boosted stocks Tuesday. Hopeful investors pushed the Dow higher by 305 points. Oil climbed about 10 per cent following news of supply cuts. Much of the focus Tuesday evening was on the Presidential election which was won by Barack O’Bama.

Neil Kokemuller
Tuesday, November 4, 2008
10:05 PM EST

Neil Kokemuller is an Associate Professor of Marketing at Des Moines Area Community College in Des Moines, Iowa, USA. He has a MBA from Iowa State University.

Please note: The information provided in this article is intended for informational and entertainment purposes, and not as advice for financial decisions or investments. Actions taken on the basis of the information shared is at the sole risk and discretion of the individual. Currency investment poses significant risk of loss.