Gold jumps above $4,050 as control of Congress shifts to Democrats

• Early Asian trading on Thursday sees Gold climb to around $4,065.
• Both chambers of the US Congress came under Democratic control.
• Friday’s focus turns to September’s US employment figures.

September’s US employment figures, due later on Friday, will be closely watched for indications of the interest rate outlook. Ahead of the release, Gold price (XAU/USD) advances towards $4,065 in early Asian trading on Thursday following the Democrats’ sweep of the US midterm elections. The precious metal is up over 3.60%, marking its largest gain since mid-August.

Markets viewed the Democrats’ capture of both the US Senate and House of Representatives as an outcome likely to bring political gridlock, potentially limiting further fiscal expansion.

On Wednesday, the Democratic midterm victory pushed the US Dollar (USD) to its lowest level in more than a month. With dollar-denominated bullion becoming cheaper for overseas buyers, the currency’s decline enhanced gold’s appeal.

Nevertheless, persistent inflation concerns and still-elevated oil prices would leave the US Federal Reserve (Fed) with greater scope to ease monetary policy. Holding gold, which offers no yield, carries a higher opportunity cost when interest rates rise.

According to the CME FedWatch tool, markets now assign about an 82.7% probability to a US interest rate increase in December.

Joshua Kutin, Columbia Threadneedle’s head of multi-asset solutions for North America, said: “More broadly, there is now a hope that a change in course could finally help fight inflation,” adding: “Oil is part of this, but more broadly the expectation is that high prices will be directly addressed by incoming politicians,”

Gold rallies above $4000 as a weaker Dollar and US fiscal concerns support precious metals

Scotiabank analysts point to the strength of the rebound: “the price gold is showing an impressive near-3% gain on the day, climbing back above the psychologically important $4000/oz level as the price of silver pushes to a near-5% pop.” In explaining the advance, they observe that “the gains in precious metals may be attributed to a combination of the broader USD’s moves, as well as market participants’ concerns related to the US fiscal outlook,” highlighting the direct support that renewed Dollar weakness and growing fiscal unease are providing to bullion’s latest rally.

Technical Analysis: Gold remains bearish beneath the 100-day SMA

Trading below both the 20-day simple moving average (SMA) and the 100-day SMA leaves XAU/USD with a bearish near-term bias on the daily chart. These key trend indicators continue to constrain rallies while spot remains beneath them. Meanwhile, the Relative Strength Index (14), at around 48, points to neutral momentum rather than oversold conditions. This suggests sellers still hold the structural advantage, notwithstanding the recent recovery from below $4,000.

The first upside hurdle is the Bollinger Bands’ 20-day middle band at around $4,075. Beyond that lie the 100-day SMA at $4,205 and the upper Bollinger band near $4,255. Support is next seen at the lower Bollinger band, around $3,900. A breach would likely pave the way for a deeper correction; if that floor holds, XAU/USD would remain in a broad consolidation below its key moving averages.

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