Investment Rationale: Impact of the 2024 U.S. Presidential Election on Forex and Gold

Executive Summary

The 2024 U.S. Presidential Election is a critical event with anticipated effects on forex and commodities markets, particularly for the U.S. dollar and gold. Each candidate’s economic policy direction—Donald Trump’s nationalistic trade stance and Kamala Harris’s focus on infrastructure and social programs—presents unique implications for these asset classes. As volatility rises, PU Prime’s financial analysts examine how these potential policy shifts may influence market positioning and provide insight into strategic investment considerations for both forex and gold.

How US Election Affect Dollar Movement

USD Strength from Trump’s Nationalistic Policies: 

• Donald Trump’s economic platform emphasizes tax reforms, tariffs, and a focus on domestic trade competitiveness. His approach typically boosts the U.S. dollar as tariffs reduce foreign competition and attract capital, especially for USD pairs like EUR/USD and GBP/USD. Investors may anticipate short-term dollar strength if Trump continues this approach, benefiting dollar assets relative to risk-sensitive currencies.

Long-Term Growth Focus under Harris: 

• Kamala Harris’s proposed fiscal policies emphasize sustainable economic growth through infrastructure and social spending, aiming to stimulate domestic demand. While less aggressive in immediate dollar impact, her strategy may contribute to steady economic growth over time, possibly leading to a stable dollar environment in the long term.

U.S. Treasury Yields and Dollar Demand: 

• Recent increases in U.S. Treasury yields reflect investor confidence in the U.S. economy and further support dollar demand as a safe-haven currency. Both policy trajectories could drive fluctuations in Treasury yields, which may amplify or temper the dollar’s strength.

Investment Implications Summary:

The 2024 U.S. Presidential Election presents distinct economic policy directions with significant potential impacts on USD positions. Trump’s protectionist approach could support short-term dollar strength, particularly against risk-sensitive currencies, as tariffs attract capital and boost domestic competitiveness. On the other hand, Harris’s focus on infrastructure and sustainable growth may lead to a more stable dollar environment over the long term, with moderate immediate impacts. Rising U.S. Treasury yields, reinforced by confidence in the U.S. economy, underscore the dollar’s safe-haven appeal and may drive further demand amid election volatility. Investors are advised to consider long USD positions against risk-oriented currencies, remain vigilant for policy-driven market shifts, and closely monitor yield movements for positioning in USD pairs.

Short-term Analysis: Dollar Index 

Diagram 1.0: Dollar Index (H4 Chart)

Fundamental Analysis (DOLLAR_INDEX): 

The Dollar Index has shown sustained resilience, continuing to extend its gains due to robust U.S. economic data and the Federal Reserve’s hawkish stance. This momentum is reinforced by rising U.S. 10-year Treasury yields, which are positively correlated with dollar demand as they reflect expectations of higher interest rates. The upcoming U.S. Presidential Election adds another layer of uncertainty, likely creating heightened demand for the dollar as a safe-haven asset. Additionally, the possibility of continued fiscal stimulus could widen the budget deficit, prompting further rate hikes to control inflation. Meanwhile, Trump’s potential trade policies, including tariffs, could negatively impact high-risk currencies, driving investors toward dollar-denominated assets.

However, these projections hinge on the election’s outcome and evolving economic conditions. Crucial data releases this week—including the U.S. Nonfarm Payrolls, Unemployment Rate, and GDP—will provide further insight into the dollar’s trajectory. Investors should monitor these updates to assess the strength of the dollar’s rally and possible shifts in market sentiment.

Technical Analysis (DOLLAR_INDEX):

On the technical front, the Dollar Index maintains an upward trend, recently rebounding from the key Fibonacci support level at 103.95 (61.8% retracement). The MACD shows a reduction in bearish momentum, and with the RSI currently at 68, the index could extend its gains toward the next resistance levels at 105.00 and 105.50. Support levels to watch are at 103.95 and 102.55, providing potential re-entry points if the dollar retraces.

Outlook Summary:

The dollar’s recent strength stems from strong economic data and increased demand as a safe-haven asset amid election-driven uncertainties. Continued bullish momentum may be expected if U.S. economic data remains favorable, while further yield increases would bolster dollar demand. However, monitoring both the election’s developments and incoming economic data is essential for capturing potential shifts in the dollar’s short-term trend.

Diagram 2.0: U.S. 10-Year Treasury Yields (1-Month Trend)

Gold Market Analysis: Safe-Haven Demand Amid Fiscal and Geopolitical Concerns

Fiscal Policies and Inflation Risks as Gold Drivers

• Gold remains a preferred inflation hedge, especially with anticipated fiscal expansion under both candidates. U.S. debt has surpassed 120% of GDP, and continued deficit spending under either Trump’s tax cuts or Harris’s fiscal programs may elevate inflation risks, making gold attractive for investors seeking stability.

Diagram 3.0: Federal Debt as a Percentage of GDP

Geopolitical Tensions and Central Bank Demand

• Growing geopolitical instability and the global trend toward “de-dollarization” has increased central bank demand for gold, with emerging markets particularly boosting their reserves. Trump’s potential continuation of tariff policies may accelerate this trend as nations seek alternatives to the dollar, supporting long-term demand for gold.

 Historical Trade Tensions and Gold

• The 2018 trade war illustrated gold’s appeal as a haven during heightened tariffs and market instability. If Trump resumes trade tensions, gold could again benefit as a risk-off asset.

Investment Implications Summary:

The current fiscal landscape and geopolitical factors create a supportive environment for gold. Fiscal expansion, whether through tax cuts or infrastructure spending, could heighten inflation risks due to the U.S. debt level, elevating gold’s appeal as a hedge against inflation. Additionally, increased central bank demand amid global “de-dollarization” trends—especially if tariff policies are reinstated under Trump—further supports long-term demand for gold as a stable asset. With gold’s historical resilience during trade tensions, investors may consider strategic gold positions to safeguard portfolios amid inflationary and geopolitical pressures.

Diagram 4.0: Trade War Timeline (2018–2020)

Potential Risks in Gold

Despite favorable demand factors, gold’s price may face volatility, especially if speculative positions become excessive. Price corrections could occur if technical support levels are breached, potentially leading to downward pressure.

Short-term Analysis: GOLD

Diagram 5.0: Gold Price Analysis (H4 Chart)

Fundamental Analysis (GOLD):

Gold prices are holding steady as investors anticipate key events that could stimulate safe-haven demand. With the U.S. election approaching, the Federal Open Market Committee’s (FOMC) upcoming interest rate decision, and multiple U.S. economic data releases, significant volatility in the gold market is expected. These factors create a crucial environment for traders to watch for signals that may drive shifts in gold prices over the week.

Technical Analysis (GOLD):

Gold prices recently broke through a previous resistance level, maintaining an upward trend. The MACD indicator reflects increasing bullish momentum, and with the RSI at 59 and being held above the midline, the commodity could see further gains in the short term. Key levels to watch include resistance at 2755.00 and 2770.00, while immediate support lies at 2735.00 and 2707.30, providing guidance on potential re-entry points if prices are retraced.

Outlook Summary:

With heightened anticipation around key market events, gold remains a favored asset for risk-off positioning. Both technical and fundamental indicators point toward a cautious upward trend, yet close monitoring of economic announcements and policy signals will be essential to capitalize on near-term movements.

Conclusion

The 2024 U.S. Presidential Election is likely to drive volatility in forex and gold markets. Trump’s nationalistic trade policies could strengthen the dollar, while Harris’s growth-focused spending may support long-term economic stability. Gold, meanwhile, stands as a resilient hedge in the face of fiscal and geopolitical risks, buoyed by inflation concerns and central bank demand. Investors are advised to stay attuned to policy developments, yield movements, and technical indicators to capture value in this election-driven environment, positioning strategically in USD and gold as part of a well-balanced investment approach.