The United States held its midterm elections on Tuesday, November 3. Investors need not worry about who wins, because what matters most is a practical question: after past midterm elections have concluded, how have gold prices typically moved? We can turn straight to real historical price records for the answer.
From 1974 to 2022 there have been 13 midterm elections in total. The comparison method is simple: take the average gold price for November of the election year and compare it with the average price for November one year later. This looks at a full monthly average, not short-term moves on election day itself.
In 8 of the 13 cases, gold was higher one year later, while prices fell in the other 5. The average gain was 14%, and the median gain was 15%. In the two more recent midterms that many people remember, gold rose 20% in the year after 2018 and 15% in the year after 2022.
The historical range is very wide: in the worst case, gold fell 22% over one year, while in the best case it rose 90%. In 11 of the 13 cases, the moves fell between -8% and +28%. Looking only at an average does not show how violent the swings were.
Two episodes stand at opposite extremes. After the 1978 midterm elections, Democrats kept control of both the Senate and the House. Over the following 12 months, the average November gold price rose from about $206 to $392 an ounce, a gain of 90%. That period coincided with the second oil crisis, turmoil in Iran, the hostage crisis, and Volcker taking over the Federal Reserve in August of that same year. The rally did not stop there; after the Soviet invasion of Afghanistan, gold pushed above $850 in January 1980.
After the 1974 midterm elections, Democrats also retained control of both chambers. The dollar had already been separated from gold and prices had already surged, but after that election the market turned down. Within a year, the average November gold price fell from $182 to $142, a drop of 22%, beginning a major bear market for gold in the era of floating exchange rates.
The 2010 case shows the timeline most clearly. On November 2, Republicans won a majority in the House, and the very next day, November 3, the Federal Reserve announced a second round of bond purchases, buying $600 billion of Treasuries. By November of the following year, the average monthly gold price was 27% higher than in the election month.
It is important to distinguish this: these major events merely happened in the same period, and the elections themselves did not drive gold higher; the election is simply the starting point for our market statistics.
Now let us look at silver. In the same 13 cases: it rose 9 times and fell 4 times. The average gain was 20%, and the median gain was 12%. That high average gain is mainly due to the 1978 episode: silver rose from $5.90 to $16.70, a gain of 183%.
Silver has not always beaten gold. In the 4 declining cases, silver fell less than gold 3 times, and in 1998 silver rose while gold fell.
Let us also divide the data into two groups based on whether congressional power changed hands. In 8 of the 13 midterm elections, at least the Senate or the House changed majority party afterward. In that group, gold rose an average of 15% one year later. In the other 5 cases, the party in power did not change after the election, and gold rose an average of 11%. The difference between average gains in the two groups is not large. The reason volatility in the no-power-change group looks especially exaggerated is entirely due to the 90% surge in 1978, which lifted the range; a single sample can change the overall impression.
Here we must discuss the real limitations. There are only 13 historical observations, which is not a large sample. Gold rose in 8 of the 13 cases, only slightly more often than it fell, similar to a coin toss coming up heads a bit more frequently.
From 1971 to now, gold prices have climbed from $39 to above $4,000. The median gain after midterm elections is 15%, higher than the median one-year gain of 5.9% from any randomly chosen month. But with so little data, this cannot be treated as a stable and reliable trading rule.
History can only tell us what kinds of price moves have occurred before; it cannot prove that election results directly drive gold prices up or down, nor can it predict how this one will unfold.
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