We asked AI what could happen to the prices of gold and silver if Biden drops out of the presidential race. Here's what it told us...

The price movements of gold and silver can be influenced by a variety of factors, including political events. If President Biden were to drop out of the presidential race, the impact on gold and silver prices could be significant due to the following reasons:

1. Political Uncertainty:
   • Increased Uncertainty: The announcement of Biden dropping out would likely create political uncertainty, which typically leads to increased demand for safe-haven assets like gold and silver. Investors might seek these metals as a hedge against potential volatility in the stock market and currency fluctuations.
   • Impact on Economic Policies: Uncertainty about future economic policies could arise, especially regarding fiscal and monetary policy. Changes in leadership often lead to changes in policy direction, which could affect investor sentiment.
2. Market Reactions:
   • Risk Aversion: Investors tend to become more risk-averse during times of political turmoil, leading to higher gold and silver prices as they move capital into safer investments.
   • Stock Market Volatility: Political instability could lead to volatility in the stock market, prompting a flight to safety. Historically, when stock markets are unstable, gold and silver prices tend to rise.
3. Monetary Policy Implications:
   • Federal Reserve Actions: The Federal Reserve might react to increased political uncertainty by adjusting its monetary policy stance. For example, if the political situation leads to economic instability, the Fed might adopt a more accommodative stance (preferring for lower interest rates and more supportive economic measures), which could weaken the dollar and support higher gold and silver prices.
4. Economic Confidence:
   • Consumer and Business Confidence: Political uncertainty can also affect consumer and business confidence, potentially leading to reduced spending and investment. This could slow down economic growth, prompting investors to turn to gold and silver as protective measures.
5. Global Reactions:
   • International Markets: Global markets would react to such significant political news in the U.S. The impact on the U.S. dollar and global investor sentiment could further drive demand for gold and silver internationally.

Historical Context

Looking at historical data can provide insights into how gold and silver prices have responded to similar political events in the past. For instance, during times of significant political changes or uncertainties (such as elections or unexpected political announcements), gold and silver have often seen price increases.

Potential Scenarios

• Short-term Spike: In the immediate aftermath of such an announcement, there could be a sharp spike in gold and silver prices due to a rush to safe-haven assets.
• Medium to Long-term Trends: Depending on how the political situation evolves, prices could stabilize or continue to rise if uncertainty remains high.

Conclusion

If President Biden were to drop out of the presidential race, it would likely lead to increased demand for gold and silver as safe-haven assets due to heightened political uncertainty and potential market volatility. Investors would closely watch the unfolding political landscape and its implications for economic policy and stability.

This response seems logical, but isn't very telling. We asked the AI to put some teeth behind the "short-term spike". At the time of writing gold is sitting at $2,363 and silver at nearly $31. Given these prices, we asked what a "short-term spike" might look like.

The magnitude of a short-term spike in gold and silver prices due to President Biden dropping out of the presidential race would depend on several factors, including the extent of the resulting political uncertainty, investor sentiment, and market conditions at the time. While it’s difficult to predict exact figures, we can look at historical precedents and typical market reactions to similar events to estimate the potential range.

Historical Precedents

• Brexit Vote (2016): Following the unexpected Brexit vote, gold prices surged by about 6% in the immediate aftermath due to heightened uncertainty.
• 2008 Financial Crisis: During periods of intense financial and political instability, gold prices experienced significant short-term increases, sometimes spiking by 10% or more within a few weeks.
• US Elections: Major election surprises or uncertainties have historically led to gold price increases of 3-5% in the short term.

Estimations Based on Scenarios

Moderate Reaction

• Gold: Increase by 3-5%
  • 3% increase: $2,363 * 1.03 = $2,434.89 per ounce
  • 5% increase: $2,363 * 1.05 = $2,481.15 per ounce
• Silver: Increase by 5-7%
  • 5% increase: $30.91 * 1.05 = $32.46 per ounce
  • 7% increase: $30.91 * 1.07 = $33.07 per ounce

Severe Reaction

• Gold: Increase by 7-10%
  • 7% increase: $2,363 * 1.07 = $2,529.41 per ounce
  • 10% increase: $2,363 * 1.10 = $2,599.30 per ounce
• Silver: Increase by 10-15%
  • 10% increase: $30.91 * 1.10 = $34.00 per ounce
  • 15% increase: $30.91 * 1.15 = $35.55 per ounce

Mild Reaction

• Gold: Increase by 1-3%
  • 1% increase: $2,363 * 1.01 = $2,386.63 per ounce
  • 3% increase: $2,363 * 1.03 = $2,434.89 per ounce
• Silver: Increase by 2-4%
  • 2% increase: $30.91 * 1.02 = $31.53 per ounce
  • 4% increase: $30.91 * 1.04 = $32.14 per ounce

Summary of Potential Price Increases

• Gold:
  • Mild Reaction: $2,386.63 – $2,434.89 per ounce
  • Moderate Reaction: $2,434.89 – $2,481.15 per ounce
  • Severe Reaction: $2,529.41 – $2,599.30 per ounce
• Silver:
  • Mild Reaction: $31.53 – $32.14 per ounce
  • Moderate Reaction: $32.46 – $33.07 per ounce
  • Severe Reaction: $34.00 – $35.55 per ounce

These estimates provide a range of possible price increases for gold and silver based on different levels of market reactions to the political uncertainty.

We then zoomed out and asked the AI to consider the overall climate in the United states (debt, conflicts abroad, etc.) and asked what the most likely scenarios could look like.

Likelihood of Scenarios

• Most Likely Scenario: A combination of geopolitical conflicts and economic concerns driving steady increases in gold and silver prices. Given the current global and domestic landscape, this seems the most plausible scenario.
• Moderate Likelihood Scenario: Significant political instability in the U.S. leading to moderate price increases.
• Less Likely Scenario: Escalation of geopolitical conflicts leading to substantial short-term spikes unless there are major developments.

Alas, after digging into the "short-term spikes" it seems that steady increases in gold and silver prices are the most likely. Of course, all that has been shared here are AI predictions and are subject to some degree of error. Therefore, we encourage you to ingest these insights with a grain of salt and gut check them against your own experience and intuition. For information about precious metals' historical performance or Lear Capital's buying process or inventory, call us at 1-800-576-9355. We're always happy to answer questions.