How are USD weakness and softer bond yields extending gold’s post-election rally?

• Gold pushes further above $4,100, supported by relentless USD selling following the US elections.
• The metal draws additional support as cheaper oil calms inflation concerns and pulls US bond yields lower.
• With traders awaiting the US NFP report, expectations of hawkish central bank policy could restrain bullion's advance.

Strong buying momentum lifts Gold (XAU/USD) beyond $4,100 to a two-week high in Thursday's Asian session, extending the previous day's rally of over 3.5% – its largest daily rise since mid-August. A key support for the metal is the US Dollar (USD), which continues to hover near the one-month low reached after the US election results.

A major uncertainty receded with the Democrats' sweeping victory in the US midterm elections, while expectations of renewed military strikes against Iran by US President Donald Trump also diminished. On Wednesday, Top Senate Democrat Chuck Schumer pledged to seek an end to the Iran war, saying his party could leverage control over government funding to pursue that objective. This optimism has driven crude oil to a two-month low and tempered inflation concerns. US bond yields face additional pressure from expectations that fiscal gridlock in Washington could constrain government spending. Lower yields, in turn, keep the USD under pressure and lend support to the commodity.

Why Has the Dollar's Response to the Democratic Victory Been Muted?

For MUFG/BTMU analysts, the limited declines in the Dollar and US Treasury yields so far contrast with the extent of the Democratic victory. They note that the “scale of the win for the Democrats – which has surpassed any predictions reported prior – has not been matched by the scale of moves in the financial markets,” while arguing that the changed political landscape could yet be decisive for the currency. If later developments prompt a repricing of policy or geopolitical risks, they say, “That would certainly reverse the move lower we are seeing now in the dollar and Treasury yields,”. On the other hand, MUFG/BTMU suggest that “if Trump does not attack Iran and he sees this repudiation of his policies from voters as reason to seek a deal, an extension of dollar weakness is much more likely,” highlighting the role of the post-election policy response in determining whether the Dollar's retreat extends or turns around.

The political change has done little to alter expectations of additional tightening by the US Federal Reserve (Fed). Traders continue to assign over an 80% probability to a December increase in US borrowing costs, according to the CME Group's FedWatch Tool. Stronger-than-expected US ADP data reinforced those bets: private-sector employment rose by 86,000 in October 2026, equal to the downwardly revised figure for the preceding month. In a separate release, the Institute for Supply Management's (ISM) Services PMI eased from September's 54.9 to 54.5 last month. Nevertheless, it stayed above the 50 mark, signalling continued expansion.

Non-yielding Gold could also find its upside restricted by expectations of rate increases at other major central banks. A 25 basis points (bps) rise in the Bank of England's (BoE) main interest rate is widely anticipated at its policy meeting later today. Meanwhile, minutes of the Bank of Japan's (BoJ) September meeting showed that policymakers discussed the need to keep raising rates, potentially at a faster pace. Markets have also increased the probability they assign to December rate hikes by the European Central Bank (ECB) and the Swiss National Bank (SNB). Together, these expectations call for some caution before taking positions for further gains in the precious metal.

Friday's closely followed US monthly employment release, commonly called the Nonfarm Payrolls (NFP) report, could give traders reason to hold back in the meantime. Alongside remarks by influential FOMC members, the key figures will be assessed for fresh indications of the Fed's policy trajectory, shaping near-term USD demand. Developments in the Middle East crisis could also generate volatility and give Gold prices fresh impetus.

What Does the XAU/USD 4-Hour Chart Show?

Can Gold Sustain Its Technical Momentum?

Thursday's move above both the 200-period Simple Moving Average (SMA) and the 23.6% Fibonacci retracement of the August-October decline leaves XAU/USD with a positive bias on the four-hour chart. At 75.77, however, the Relative Strength Index (RSI) signals overbought conditions. The Moving Average Convergence Divergence (MACD) line continues to rise above its signal line, accompanied by a positive and widening histogram. These readings suggest that buying pressure remains in place, even though the rally appears advanced.

The immediate question is whether buyers can overcome the 38.2% Fibo. retracement at $4,186 without an overbought-driven correction. Beyond that, resistance lies at the 50.0% level of $4,283, followed by $4,380. The wider Fibonacci band extending to $4,518 and $4,695 limits the medium-term recovery. Initial support could come from the 200-period SMA near $4,124 and then the 23.6% level at $4,065. Should the latter give way, the structural floor near the recent cycle low of $3,871 would come into view.

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