Georgia senate race is coming to an end. On January 5, the election will finish, and possibly within one or two days new senators will be announced. Normally, the election of 2 senators won’t mean a big difference for markets but the January race will be different.
US House of Representatives is in democrats’ control and the President’s chair is passing to the democrats as well. But the senate has a republican majority and can block many bills such as the 2.4 trillion fiscal package. Currently, Republicans hold the majority of 52-48, including 2 republican Georgian senator chairs whose about to enter the election. If in these two elections 2 democrats to be chosen, parties will be at a tie with 50-50 and Vice President Harris can change this tie with her vote to democrats favor. This means a Blue Wave.
A possible blue wave will be especially positive for precious metals like gold and silver. Democrats’ 2.4 trillion fiscal stimulus package was blocked by republicans and after nearly half of year-long negotiations, a package worth slightly less than 900 billion was accepted. Joe Biden already began to speak about another stimulus which probably will be blocked by the republican majority for a long time. If a blue wave happens, trillions worth of stimulus likely to happen which may fuel precious metals.
Historically, government spending was increased in blue wave periods. With increased spending, both total public debt and inflation expectations will increase. Both of these situations fundamentally positive for gold and other precious metals.
In the XAUUSD chart below, 3 blue wave periods since 1975 is shown. In the 1976-1981 period while Jimmy Carter’s Presidency, gold has increased %338.48. In other 2 times, first periods of Clinton’s and Obama’s Presidencies, %14.56 and %77.42 surges happened. Total annual gold performance is %5.17 during 1975 to today’s period and those blue wave period’s performance was near %24 annually.
Currently, republican Perdue is up %0.4 against Ossoff and democrat Warnock is up %0.5 against Loeffler according to polls. Trump’s $2000 check talk has not been helpful for Republican candidates so far. Republicans’ small advantage has been erased. After Trump’s words, the democrat majority in House, pass the stimulus bill change of $600 personal checks to $2000 to increase the pressure against republicans. This may change the tide of the race in favor of a blue wave.