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September 15, 2010
Gold and the Obama Administration
On September 13 Gold hit a new high of $1,274.00 per ounce. Gold has often been the safe haven for investors fearful of future financial downturns and political upheavals. As such it also serves as a barometer of the success or failure of economic policy being pursued by the major western economies, particularly the United States.
A cursory examination of the price of Gold the day after a Presidential election in the United States versus the price of Gold 22 months thereafter as well as the end of a President's first term shows more than any government issued statistic or media-driven poll the perceived success or failure of a Presidency.
In reviewing that period in the administrations of Jimmy Carter, Ronald Reagan, George W. Bush and Barack Obama the following is revealed:
In 1976 Jimmy Carter won the election versus Gerald Ford. On November 3, 1976 Gold was priced at $122.50 per ounce. By September 15, 1978 the price had risen to $212.15 per ounce (an increase of 73%). Thanks to some of the most inept policies ever adopted by an administration (up to that time). These policies resulted in the worst downturn in the economy since the Great Depression so that by the end of Carter's term and Election Day 1980 Gold was selling at $652.00 per ounce, a jump of 432%)
Ronald Reagan came into office, following Jimmy Carter, with what was the worst recession since the 1930's. Unemployment hit 10.5%, the prime rate exceeded 18% and confidence was at an all time low. The prospects for the economy and the country were the bleakest since the Great Depression. On Election Day Gold was selling at $652.00 per ounce. However, thanks to the President's newly enacted economic program by September 14, 1982 gold had stabilized and was selling for $666.50 per ounce (an increase of only 2%). By the end of Reagan's first term and on Election Day 1984 Gold had fallen to $343.80 an ounce (a decrease of 48%).
George W. Bush won a contentious election in November 2000. At that time Gold was selling for $265.50 per ounce. Within ten months the attack on Sept. 11, 2001 occurred and an inevitable downturn in the economy ensued which was countered by adopting many of Ronald Reagan's policies. By September 14, 2002 Gold was selling for $273.25 per ounce (an increase of 3%). At the end of the first Bush term and on Election Day 2004 Gold was selling for $333.00 per ounce or an increase of 25%.
On Election Day 2008 and as an aftermath of the financial market meltdown, Gold was selling at $652.00 per ounce. President Obama has since passed various incarnations of stimulus bills, new taxes, Health Care Reform, Financial Reform and tens of thousands of pages of new regulations. As of September 13, 2010 Gold is selling for $1,274.00 per ounce (an increase of 72% nearly mirroring Jimmy Carter's performance 32 years earlier). It appears that by the end of his first term, if significant changes are not made, Obama will surpass his predecessor as the possessor of the worst economic record since the 1930's.
In summary: % Increase in Gold Price after first 22 months post Election Day
Jimmy Carter 73%
Ronald Reagan 2%
George W. Bush 3%
Barack Obama 72%
While the President and his puppet Joe Biden run around touting the "Summer of Recovery" and the so-called "jobs saved", the market is not fooled by empty rhetoric or suspect statistics coming from the bowels of Washington D.C. It is not only the ongoing ineptness of the current governing class that has completely eroded confidence in the current policies of this administration, it is also their stubbornness in their allegiance to radical re-distribution ideology.
Perhaps some of the people can be fooled some of the time but the markets will not be. They will reflect reality.