Gold recovers further as US jobs data draw attention amid post-election volatility

• Following Wednesday’s strong advance, Gold extends its gains as traders weigh the consequences of Democratic control of Congress.
• Expectations of a hawkish Fed continue to pose a significant obstacle for the non-yielding metal.
• With bullish momentum strengthening in XAU/USD, the 21-day SMA provides the first line of support.

At around $4,130 at the time of writing, Gold (XAU/USD) is trading close to two-week highs on Thursday. Its continued advance takes it further above last week’s year-to-date low of $3,870. Buyers are turning to the metal as the US midterm election results stir volatility across financial markets.

Wednesday brought a 3.64% jump in the precious metal and an 8% fall in West Texas Intermediate (WTI). Behind those moves was speculation among traders that a Democratic sweep of Congress could curtail funding for Trump’s military campaign against Iran and intensify pressure to end the war, which is now in its ninth month.

The possibility of divided government also allays worries about the fiscal outlook, since securing approval for further tax cuts or spending packages could prove harder. That prospect encourages purchases of Treasuries, lowering yields and putting pressure on the US Dollar (USD). Meanwhile, falling Oil prices provide some respite from inflation worries. Together, these factors are reviving demand for Gold.

Thursday has, however, seen selling pressure ease across the US Dollar, Treasury yields and Oil prices after the previous day’s sharp declines. This should limit the scope for further gains in Gold.

A hawkish outlook for the Federal Reserve (Fed) continues to present another major obstacle for bullion. Inflation risks persist because Oil prices remain substantially above their pre-war levels. As the Fed remains committed to returning inflation to its 2% target, traders expect interest rates to stay high for longer and foresee a rate increase in December. The CME FedWatch Tool places the probability of that increase at around 79%.

By raising the opportunity cost of holding an asset that pays no yield, higher borrowing costs put pressure on the metal.

US employment figures are now in focus for their potential influence on expectations for the Fed’s policy course. Thursday’s Initial Jobless Claims release will be followed by Friday’s Nonfarm Payrolls (NFP) report.

Technical analysis: Gold bulls target 50-day and 100-day SMAs around $4,200

Trading beneath its medium- and long-term moving averages leaves XAU/USD’s upside constrained on the daily chart. Although the 21-day simple moving average (SMA) at $4,077 provides immediate support for the recovery, the price has yet to regain the 50-day, 100-day and 200-day SMAs.

A Relative Strength Index reading near 52 and a move into positive territory by the Moving Average Convergence Divergence (MACD) indicate firmer momentum. These signals suggest bullish pressure is building again, but they have not yet reversed the underlying bearish structure.

Should the price retreat, the 21-day SMA around $4,077 offers the first support level. Below it lie the psychological $4,000 mark and the year-to-date trough of $3,870.

Any advance would first encounter the closely grouped 100-day and 50-day SMAs, at $4,203 and $4,206 respectively. Further up, the 200-day SMA near $4,468 presents a more substantial hurdle. A clear daily close above these clustered moving averages would be needed before the prevailing bearish bias began to ease.

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