Gold gains as US midterm election results send USD sharply lower

• Early US election results put the USD under heavy pressure on Wednesday, drawing some buying interest towards gold.
• Falling US bond yields add to the dollar's weakness, although geopolitical risks help contain its losses.
• Expectations of a Fed rate rise restrain bullion's advance ahead of key US economic releases.

Early results from the US midterm elections point to greater political uncertainty, putting the US Dollar (USD) under heavy pressure and supporting Gold (XAU/USD) during Wednesday's Asian session. Initial trends suggest that Democrats could take control of both the House of Representatives and the Senate. Such an outcome raises the prospect of gridlock in Washington and limits government spending. A Democratic sweep could also be negative for technology shares and economic growth. Demand for safe-haven assets has consequently strengthened, prompting a further decline in US bond yields. This adds to the dollar's intraday slide, which has taken it to its lowest level since late September.

Gold has nevertheless struggled to extend its modest intraday rise, with hawkish expectations for the US Federal Reserve (Fed) holding it back. The CME Group's FedWatch Tool shows traders pricing in a nearly 80% probability of another increase in borrowing costs at the US central bank's next policy meeting in December. Tuesday's Job Openings and Labor Turnover Survey, or JOLTS report, from the Labor Department reinforced those expectations, indicating that hiring remained relatively stable in September. Job openings increased to 7.523 million that month, compared with an upwardly revised 7.190 million in August. Alongside resilient economic growth and persistent price pressures, these figures strengthen expectations of an imminent Fed rate rise, leaving non-yielding bullion below resistance around $3,970.

Efforts to secure a diplomatic end to the eight-month-old US-Iran war have not removed the geopolitical risk premium. President Donald Trump told the Financial Times on Tuesday that the US had no immediate plans to strike Iran, despite Israeli Prime Minister Benjamin Netanyahu signalling a possible attack later this week. Separately, a senior Iranian official told Reuters that reopening the Strait of Hormuz would require sanctions to be waived and the US naval blockade to end. Iran's Islamic Revolutionary Guard Corps (IRGC) also said four tankers had been destroyed after hitting mines south of the Strait of Hormuz. These developments heighten oil supply risks and concerns about inflation arising from volatile energy prices, supporting expectations of further Fed policy tightening.

Wednesday's US calendar brings the ADP private-sector employment report and ISM Services PMI, while further geopolitical headlines could also give gold fresh impetus. Attention remains firmly on Friday's closely watched US monthly employment figures, commonly referred to as the Nonfarm Payrolls (NFP) report. The release will shape demand for the USD and the precious metal's near-term direction. Against this fundamental backdrop, however, it would be prudent to await a sustained break above $3,970 before concluding that XAU/USD has found a bottom and positioning for a meaningful recovery from last Friday's low, the weakest level since September 2025.

XAU/USD on the 4-hour chart

Technical Outlook Remains Bearish

Trading below both the 100-period Simple Moving Average (SMA) on the 4-hour chart and all key Fibonacci retracement levels of the decline from the mid-October highs, XAU/USD retains a bearish bias. The 23.6% retracement at $3,947 provides immediate resistance, followed by the $3,970 area. Momentum indicators offer some signs of stabilisation: the Relative Strength Index (RSI) is close to neutral at 48.94, while the Moving Average Convergence Divergence (MACD) remains positive at 6.65. Neither, however, yet signals sufficient strength to challenge the prevailing bearish structure.

A sustained advance through $3,970 would bring the 38.2% retracement at $3,995 into view, followed by the 50.0% level at $4,033. Further up, the 100-period SMA stands at $4,057, ahead of the 61.8% and 78.6% retracements at $4,072 and $4,127, respectively, and then the cycle high near $4,197. If selling pressure intensifies instead, the principal structural support lies at the Fibonacci anchor around $3,869, where buyers may try to establish a floor once more.

(The technical analysis of this story was written with the help of an AI tool. Know more.)