【TMGM Financial Recap】Gold Rallies Over 3% for Its Biggest Daily Gain in Three Months as Democrats Sweep Congress and Spark a Dollar Slump!

A 3.3% rise in spot gold on Wednesday marked its strongest daily performance since mid-August. Global gold markets rebounded firmly, with the metal swiftly recouping losses incurred during a short-lived fall below $4,000.

Both the House of Representatives and the Senate passed to Democratic control after a decisive midterm election victory that also brought historic breakthroughs in some traditional Republican strongholds. In the wake of the result, the dollar reached its lowest level in more than a month, directly enhancing the appeal of dollar-priced gold to overseas buyers. The broad market assessment is that a Democrat-controlled Congress could leave US legislation deadlocked. Economic growth could suffer as a result, raising the prospect of the Federal Reserve pursuing more accommodative monetary policy in the future. Investors nevertheless put the probability of a December Fed rate hike at roughly 83%, even as their expectations for policy over the medium to long term begin to adjust.

With fears of a disputed result receding after the election, risk appetite strengthened noticeably in the near term. Wednesday brought a gain of around 2% for the S&P 500, alongside sharp swings in crude oil prices. A stronger appetite for risk tends to undermine the dollar and, through that channel, lend support to gold.

Gold’s advance was not mirrored in oil, where a pronounced correction took hold. Losses in crude oil futures reached as much as 8.7% on Wednesday. The Democratic capture of Congress prompted markets to bet swiftly on an earlier end to the US and Israeli war against Iran, on the basis that power in Washington would now be divided.

Acknowledging that the Iran issue had helped drive the Republicans’ heavy defeat in the midterm elections, Trump said the United States had no current plans to launch strikes against Iran. The war’s value was also openly challenged by Vice President Vance, who held it wholly responsible for the electoral reverse. For a weakened Trump, the prospect of a Democratic Congress able to limit his military options provides a greater incentive to seek an agreement, sources close to Gulf governments indicated. A full-scale offensive seemed less likely, while oil prices came under pressure from both the possibility of greater Middle Eastern crude exports and expectations of an easing in the conflict.

Rate Expectations Remain a Headwind for Gold:

US private-sector employment rose by 86,000 in October against market expectations of 69,000, according to Wednesday’s ADP National Employment Report. For further guidance on the interest rate outlook, investors are scrutinising Friday’s nonfarm payrolls report. A December rate increase remains highly priced in by markets, despite the Fed’s decision to hold interest rates steady at its October meeting. As higher rates make holding non-yielding gold more costly in terms of forgone returns, they continue to pose a substantial near-term obstacle for the precious metal.