With the U.S. presidential election just weeks away, MBMG Group Managing Director Paul Gambles says gold mining stocks look poised to win no matter the results of the election.
Gold has been climbing higher this year, rising nearly 24% so far in 2020. The shiny yellow metal is now more than 7% higher than it’s highs reached in 2011 and 2012, even as it sits -8% below its all-time high reached in August.
Economic uncertainty in the wake of the coronavirus pandemic has pushed gold higher, while the prospect of another round of stimulus has provided upward momentum. The precious metal is typically seen as a save haven asset for investors when economic turmoil abounds, and investors often look for exposure to stocks related to gold exploration and mining in times like these.
The GDX Gold Miners VanEck ETF—which holds names such as Barrick Gold (NYSE: GOLD), Franco-Nevada (NYSE: FNV), Newmont Corp (NYSE: NEM), and Wheaton Precious Metals (NYSE: WPM)—is so far up 33% this year.
Gambles argues that no matter the outcome of the election, gold mining stocks like the four above are well positioned to move higher.
“We have started buying gold mining stocks and we are likely to hold those way beyond the election,” Gambles said, “because we think they would benefit from stimulus, but we also think that they would benefit from the chaos of the American presidential election.”
Gambles says that should Trump win his reelection bid and Democrats retain their hold on the House, stimulus negotiations are likely to resume following what’s sure to be a contentious election, with the end result likely to be closer to the White House’s proposal of a $1.6 trillion stimulus deal.
However, if Biden wins and Democrats secure both the House and Senate, we’re likely to see a much larger stimulus bill with House Democrats having already proposed a $2.2 trillion relief package.
And if the election is a close one and Trump refuses to accept the result citing doubts about the legitimacy of mail-in ballots, and a protracted dispute plays out in the Supreme Court, it’s likely to exert downward pressure on risk assets.
In any of these possible scenarios, gold mining stocks look poised to outperform.