Massachusetts Election Impacts Gold
By Patrick A. Heller
On Jan. 19,
Massachusetts voters elected Republican Scott
Brown to finish the remaining two years of the
late Senator Ted Kennedy’s term in the U.S.
Senate. He was the first Republican elected to
represent Massachusetts in the U.S. Senate since
The election of Brown, whom Senate Majority
Leader Harry Reid promised to seat immediately,
all but eliminates the ability of Senate
Democrats and their two independent allies to
stop any Republican filibuster of legislation in
that chamber. In the past year, much of the
legislation enacted into law was done by the
Democrats with little or no Republican support.
In many instances, Republican input on potential
legislation was neither sought nor accepted.
That era will end as soon as Brown takes his
The broad implication of the election,
especially when considered with the somewhat
surprising Republican gubernatorial victories in
New Jersey and Virginia last November and the
growing number of incumbent Democrat senators
and governors who have announced that they will
not run for re-election this year, is that the
American populace does not give strong support
to Democrat President Barack Obama or his
overall legislative agenda. Some may already
consider President Obama a lame-duck president.
President Obama has devoted a significant amount
of his time in office and political capital in
trying to enact legislation for a major
modification of health care. There is distinct
possibility that now either nothing will come of
this effort or that it will be extremely watered
Unfortunately, a President whose legislative
agenda lacks widespread public support sends a
signal to the rest of the world that the U.S.
economy and the value of the U.S. dollar may be
on shakier ground than formerly perceived. In
this circumstance, the normal response from
foreign investors and trading partners would be
to reduce their U.S. dollar exposure against a
risk of further decline in the value.
Almost certainly, some of the funds pulled out
of the U.S. dollar will result in higher demand
for precious metals like gold and silver. This
would likely push up their prices.
In order to minimize the political and economic
fallout from the Massachusetts senate election,
the U.S. government has an incentive to force up
the value of the U.S. dollar and knock down the
prices of gold and silver. On Wednesday morning,
that is exactly what is occurring.
On Wednesday morning, platinum and palladium
prices are little changed. These are two metals
for which the U.S. government has no reason to
try to manipulate prices. The only precious
metals that are suddenly and significantly lower
in price are gold and silver.
In my judgment, the current lower gold and
silver prices are just a temporary blip on the
continuing strong bull market for both. I also
expect the U.S. dollar to soon resume its
long-term further decline in value.
There are a number of potential buyers of
precious metals who say they are waiting for the
“right time” to step up to buy. I think that
today buyers are being offered an excellent
opportunity. Don’t miss out.