Though it seemed like a long shot at first, recent weeks have seen Governor Mitt Romney claw his way back into the Presidential race versus incumbent Barack Obama. Some feel that Romney still won’t be able to win, but if you believe the polls all around the nation, like Gallup and Rasmussen who both have the governor edging out Obama by 7% and 2% respectively, Mr. Romney has a legitimate shot. A number of investors already favor Romney as they feel that his “free market” policies and background as a successful investor make him the ideal choice for anyone wishing to play the stock market. But many will have their eyes on how his potential Presidency would impact another commodity, gold [for more gold news and analysis subscribe to our free newsletter].
Gold has been one of the most coveted assets in recent years, as its price appreciation and safe haven status have thrust it into the limelight. As more and more investors begin to add exposure to this yellow commodity, they begin to think about the potential policies and practices of whoever will hold office come January 20th of 2013.
There are a number of interesting platforms and ideas from Romney that could certainly shake things up for everyone’s favorite commodity.
Gold Standard Commission
Now this is not a straight up call for a reversion to the gold standard, but Romney has toyed with the idea of calling for a gold standard commission. That could potentially be a major opportunity for investors everywhere. First and foremost, the price of gold would skyrocket if the possibility of some kind of tie between the greenback and gold was restored (though that seems extremely unlikely), as investors would flock to the safe haven metal. But it would also bring some other issues into the forefront, like all of the conspiracy theories that the U.S. does not hold nearly the gold that it claims it does, or that many of our vaults are nothing but phonies. Though the potential move may be tough in the short run, many feel that its long term effects could save the economy.
Regardless of where you fall on the political spectrum, the idea of returning a connection between gold and the dollar is a potentially significant development. The likelihood of this ever coming to fruition is hard to say at this point, as it certainly would not be the first time that a politician made an empty promise [see also How to Play a Republican Party Gold Standard Commission].
One promise that Romney seems willing to keep is the replacement of Ben Bernanke at the helm of the Fed. Bernanke’s addiction for printing money would likely mean hefty opposition against some kind of gold standard, but with him out of office, the remote possibility gains some slight traction.
Addressing the Debt
One of the biggest issues of the upcoming election is how to deal with the massive debt pile that is currently staring America in the face. With debt recently surpassing GDP, Romney has outlined a plan that will lower the debt by $5 trillion. Now, a politician making good on a promise (especially one involving spending habits and cuts) is about as reliable as an ice cube in Death Valley. But let’s pretend for a minute that by some miracle Romney actually does what he says he will, and the debt burden is eased by a handsome $5 trillion.
This could actually have a negative impact on gold, as one of the biggest reasons that gold has become so attractive is that many see our massive debts as a looming crisis. For as long as we owe massive amounts of money to other countries, trusting the greenback will be next to impossible, making gold extremely lucrative. But a reduction in our debt could actually restore some of the dollar’s long lost power, which could cause a few bumps in the road for gold [see also How Warren Buffett Could End The Deficit in 5 Minutes].
Again, the likelihood of either Mr. Obama or Mr. Romney putting a major dent in the debt seems extremely low at this point, but it’s worth exploring the opportunities.
Romney Owns Gold
This goes out to all of you conspiracy theory lovers out there. When a President accepts the job, he enters his funds into a blind trust so that his policies and practices can be completely separate from his money. But of course, there are those who feel that their trusts are not blind at all, and that officials like to prop up their own holdings. The Romney campaign has already stated that the Governor will enter into a blind trust run by federal officials and “any assets that are not fully compliant with federal disclosure and other rules applicable to the office of the presidency will be disposed of.”
So this tidbit may be important for those who don’t fully trust the security of a blind trust. Romney already owns gold, somewhere between $250,000 and $500,000 according to his disclosure. While this is not much in the way of Romney’s total allocation, the fact that he owns the precious commodity has conspirators chomping at the bit to get him into office. The idea being that if Romney was able to look under the hood of his “blind trust” and saw gold, his policies could conform to helping that asset climb higher. Another near-impossibility, but still something that niche investors like to theorize when making allocations.
The most likely scenario, should Mr. Romney win, is a higher deficit and more debt added on to the already-looming pile. It appears that many President hopefuls have lofty predictions of debt reduction, only to find that once they have gotten into office, it isn’t quite so simple. Higher debt keeps investing demand for gold at an all-time high and could potentially push prices higher. That being said, the above scenarios can be taken into consideration when eyeing the outlook for both of this year’s candidates.
Disclosure: No positions at time of writing.