Analysts have predicted a bearish outlook for the U.S. dollar as the country’s 2020 presidential election approaches. One analyst says gold will correct with Donald Trump’s victory followed by the collapse of the U.S. dollar. Bitcoin, on the other hand, stands to gain from the election.
Analyst and consultant Dan Popescu has shared his view on how the outcome of the U.S. presidential election could affect several markets. He discussed the outlook of the gold market and the U.S. dollar before and after the U.S. presidential election.
“Right now the markets expect [Joe] Biden to win, and that’s also one of the things that I’m quite sure has been bullish for the price of gold and the collapse of the dollar index, and that will continue,” Popescu described. Citing current polls showing Biden as the more likely candidate to win the 2020 presidential election, the analyst said the dollar will weaken and gold will climb even higher leading up to the election.
Other analysts also see the dollar’s weakness. “The shrinking of its interest rate advantage makes the USD less appealing and pushes investors to consider deposits in other currencies.”
The U.S. election will boost the price of bitcoin. Bitcoin is already one of the best-performing assets of the year, up around 70% year-to-date. It is expected that the world’s largest cryptocurrency to be further fueled for the rest of 2020 by the U.S. presidential election and the weakness of the U.S. dollar.
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Also, U.S. Federal Reserve Chair Jerome Powell is expected to bolster expectations of inflation during his keynote speech at the Jackson Hole Economic Policy Symposium on Thursday, which could ultimately lead to further drops in the dollar and greater buying power for bitcoin traders and investors.
- The Fed chief is expected to signal tolerance for higher inflation during the speech, with the central bank having mostly missed its 2% inflation target since 2012.
- “Powell has previously stated that he doesn't think inflation is a significant risk and is prepared to see it overshoot to meet his objectives,” Charlie Morris, chief investment officer at ByteTree Asset Management.
- A more relaxed approach to managing price pressures could power a stronger rise in long-term inflation in the U.S.
- “The major impact for crypto out of this symposium would be a change in monetary policy and further depreciation of the U.S. dollar, which could propel bitcoin higher,” said Matthew Dibb, co-founder of Stack.
- Inflation is expected by many in the cryptocurrency space to be a driving factor for bitcoin gains, as it's perceived to be a hedge asset similar to gold.
- The symposium, attended by central bankers, Federal Reserve members, economists, financial organizations and academics, among others, will be held virtually this year.
- The cryptocurrency has witnessed greater year-to-date gains in U.S.-dollar terms compared to those seen against other currencies such as the euro and Japanese yen.
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