How do you like gridlock?
There will likely be plenty of it in Washington, D.C.
The Blue Wave swept across the political landscape, leaving Democrats in firm control of both congressional chambers.
With a few elections “too close to call, the Democrats enjoy a 54-44 majority in the Senate and a 240-147 advantage in the House.
How might this new balance of power impact the precious metals markets?
Gold and silver both got a boost with the election results. Gold surged, recovering the $4,000 level, and silver rose to over $53.
However, post-election bounces (and selloffs) tend to be short-lived. How will things shake out in the months ahead?
Domestic demand for gold bars and coins tends to rise modestly under Democratic administrations. However, elections have not historically had a significant impact on gold’s global performance over the long haul.
According to the World Gold Council, “Given the geographic diversity of demand, what matters is whether the resulting policy changes are sufficiently consequential for the global gold market, and whether they can offset other global forces that drive the price.”
So, how might policy shift with the Democrats holding the levers of power in Congress?
Congress will remain constrained by President Trump’s veto pen. It won’t be able to impose the worst of the Democrats’ leftist economic and social schemes. However, an active Congress could significantly restrain Trump.
StoneX provided a nice list of things the Democrat-controlled Congress will be able to do:
- Block further reconciliation, including $350bn “mandatory” defense funding and new tax cuts.
- Attach conditions to must-pass appropriations and the National Defense Authorization Act (NDAA)
- Run oversight: subpoenas, hearings, contempt citations (Trump family crypto, DoJ and Federal Trade Commission antitrust, Iran war, AI)
- Control Senate confirmations: Cabinet, judges, Fed governors
- Extract concessions on the debt limit
- Pass “message” bills that set the 2028 platform
However, the president will have plenty of tools to fight back. Trump has shown no hesitation in using executive powers and pushing them to the limit.
See more: As U.S. Stocks Flatten, Commodities Take the Lead in 2026
How this tug-of-war for power will play out remains uncertain.
As Metals Focus framed the situation, “The U.S. mid-term election results introduce a new layer of unpredictability for the outlook for precious metals.”
Domestically, Trump will find it impossible to advance any additional tax cuts or finance his spending priorities. However, Democrats love to spend money. Additional spending could be coming down the pike. How much spending rises will depend on the aggressiveness of Trump's veto pen.
Metals Focus analysts think gridlock in Congress minimizes the likelihood of additional fiscal stimulus. However, they do not think it will lead to meaningful deficit reduction.
“Meaningful deficit reduction remains unlikely, given existing spending commitments, rising interest costs and the difficulty of agreeing on tax increases or expenditure cuts. Budget and debt-ceiling negotiations could also become more contentious, increasing uncertainty over U.S. fiscal management.”
Metals Focus thinks this political landscape is modestly bullish for gold and silver.
“For precious metals, these developments offer some relief from the recent macroeconomic headwinds. Constraints on additional stimulus could moderate U.S. growth and expectations for further rate hikes, easing pressure on real yields and the dollar. Their initial decline following the election has already supported gold, although continued heavy government borrowing could limit how far longer-term yields fall. For silver and the PGMs, the benefit of easier financial conditions would need to be weighed against the risk of weaker industrial demand.”
StoneX analyst Rhona O’Connell expressed a similar view:
“Less fiscal stimulus argues for lower long yields and a softer dollar, offset by debt-limit premia in bills and a Fed leaning towards another hike.”
The ongoing war with Iran has had an outsized impact on the gold and silver markets since the U.S. attacked in February. The ensuing oil shock has reignited inflation concerns and raised expectations of a “higher for longer” interest rate environment. This has created significant headwinds for non-yielding gold and silver.
Congress could theoretically defund the war. It could also try to use the War Powers Act to rein in the president. However, neither strategy would likely get around Trump's veto pen.
Democrats will also navigate significant political constraints when addressing the war. Trying to cut funding for “the troops” in the middle of a shooting war isn’t politically viable.
At best, Congress may be able to pressure Trump into negotiations. However, it could also incentivize the president to escalate the war before the new Congress can interfere. Once a war has momentum, it’s hard to slow down, much less stop.
Ultimately, the war will create headwinds for gold and silver until the U.S. and Iran reach a permanent settlement. And that doesn’t seem likely. However, things can change quickly in the world of foreign policy.
Metals Focus noted that a durable settlement with Iran would “materially ease” energy price-driven inflation pressures weighing on precious metals and create greater scope for monetary easing.
“This would lower real yields, and a weaker dollar would improve the investment backdrop. Silver and the PGMs could also benefit from lower energy costs and stronger global industrial activity.”
However, the impact wouldn’t be immediate. It will take months to reestablish broken supply chains and restore wrecked refining capacity.
On the flip side, an escalation of the war would likely intensify inflation worries and ratchet up interest rate pressure.
The president will also retain significant power over trade and tariffs. Congress delegated significant decision-making power to the executive branch when it crafted trade policy. As with the war, Congress will have some power to check Trump’s authority; however, he will almost certainly make good use of executive authority, and he will be able to veto any attempts to rein him in.
Meanwhile, the Federal Reserve will continue to play an outsized role in the trajectory of the precious metals markets. Neither Congress nor the president has much power over the Fed’s rate-setting policy.
The Fed outlook is mildly hawkish, with virtually everybody penciling in a rate hike in December and another in early 2027. However, that path isn’t as certain as many would have you believe.
The central bank must navigate the Debt Black Hole. While one can argue rate hikes are necessary to rein in inflation, you can also make a good case for rate cuts to support the debt-riddled, bubble economy. Massive debt levels and an economy addicted to easy money don’t play well in a higher-interest-rate environment.
The bottom line is that we can expect more policy uncertainty in the weeks and months ahead. There will be a lot of bickering and arguing, but how much actually gets done remains to be seen.
Probably not much.
Mike Maharrey is a journalist and market analyst for Money Metals with over a decade of experience in precious metals. He holds a BS in accounting from the University of Kentucky and a BA in journalism from the University of South Florida.
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