Will Gold Benefit from Trump Impeachment Proceedings? / Commodities / Gold & Silver 2019

This week, Nancy Pelosi announced that the House wouldlaunch a formal impeachment inquiry. Is it a well-grounded argument, publicitystunt or reflection of the growing polarization inside the Democratic party?Storm in a tea cup or not, should Trump be worried? And gold?

What’s This All About?

On Tuesday, Nancy Pelosi, House Speaker, announcedthat “the House of Representatives is moving forward with an officialimpeachment inquiry.” That’s a big shiftamong Democrats, who control the House. They were talking about the Trumpimpeachment for months and for a variety of reasons, but never launched theprocess. What changed their minds?

The impeachment inquiry is a response to revelationsthat President Donald Trump allegedlypressured the Ukrainian president to investigate the potential 2020 Democraticcandidate Joe Biden and his son, Hunter. According to the White House summary of a30-minute July 25 phone conversation between U.S. President Donald Trump andUkrainian President Volodymyr Zelenskiy, Trump said:

there’s a lotof talk about Biden’s son, that Biden stopped the prosecution and a lot ofpeople want to find out about that so whatever you can do with the AttorneyGeneral would be great. Biden went around bragging that he stopped theprosecution so if you can look into it… It sounds horrible to me.

For us, it does not sound malicious, but we are notfamiliar with the diplomatic protocol and the nuances of the Constitutionallaw. Anyhow, according to Democrats, the problem is that Trump demanded aforeign country intervenes in the 2020 presidential election by digging up dirton his potential opponent, and that he was possibly threatening Ukraine bysaying he would withhold U.S. military aid unless they complied. Another issueis that the Trump administration was allegedly preventing the whistleblower’scomplaint from being shared with Congress, which is against the law.

It’s an irony that it had been the Democrats who havein May 2018 written to the Ukrainian government, urging it to continueinvestigations into the alleged Trump-Russia collusion that was later found notto exist. Nevermind, the world of politics has seen weirder things already.

Can Trump BeImpeached?

Rightly or not, we are now headed toward animpeachment inquiry with Democrat leadership’s full backing. Can Trump beimpeached? Sure, he can. Impeachments is, after all, not the removal from thepost, but the adoption of charges by the House, which triggers a trial in theSenate. Now, the key is although the House is under the control of Democrats,the Senate is Republican. So, theremoval of Trump is unlikely. The idea that two-thirds of Senators wouldvote against Republican-backed president in the election year is rather silly.According to the popular betting site, PredictIt, the odds that Trump will beconvicted by the U.S. Senate are at around 18 percent.   

Implicationsfor Gold

What does it all mean for the gold market? As the oddsof conviction are very low, the whole impeachments process shouldn’t have anysignificant impact on gold prices. It’s just theatre. But it may support gold prices, if the drama helps Democrats in thecampaign. So far, Biden leads the polls, and he is considered to be neutralfor the markets. But as Elizabeth Warren’s poll numbers rise, so does anxietyon Wall Street.

However, only 36 percent of registered voters supportthe impeachment. So, the impeachment may actually come back to bite theDemocrats, just as Clinton’s impeachment damaged Republicans in the 1998midterms. It would paradoxically support Trump and would be rather positive forthe stock market (especially if Trump strikes finally the trade deal withChina), and stocks prefer the status quo. Hence, such scenario could be negative for gold prices on the margin.

In the short-term, therising political uncertainty may help gold. On Tuesday, gold gained, as thechart below shows. 

Chart 1: Gold prices fromSeptember 24 to September 26, 2019

But we are skeptical whether allthese revelations will have a significant impact on the gold market. Yesterday,the gold prices dropped. Trump faces legal problems since the very beginning,without any material effects.

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Arkadiusz Sieron
Sunshine Profits‘ MarketOverview Editor

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