Sudden USD slide following US midterm election results nudges gold higher

• Gold finds buying interest on Wednesday, with the USD under heavy pressure from early US election results.
• The dollar faces additional pressure from falling US bond yields, although geopolitical risks cushion its decline.
• Bullion's upside remains constrained by Fed rate hike expectations ahead of key US economic releases.

Gold (XAU/USD) edges higher in Wednesday's Asian session, supported by sharp weakness in the US Dollar (USD) as early US midterm election results deepen political uncertainty. Initial trends suggest that Democrats could win control of both the House of Representatives and the Senate, raising the possibility of a deadlock in Washington that limits government spending. A Democratic sweep could also hurt technology stocks and economic growth. The resulting demand for safe-haven assets is driving a renewed decline in US bond yields, adding to the USD's intraday slide to its lowest level since late September.

Gold's modest intraday advance nevertheless struggles to gain momentum as expectations for a hawkish US Federal Reserve (Fed) persist. Traders put the probability of another increase in borrowing costs at the US central bank's December policy meeting at nearly 80%, according to the CME Group's FedWatch Tool. Those expectations strengthened after Tuesday's Job Openings and Labor Turnover Survey, or JOLTS report, from the Labor Department showed relatively stable hiring in September. Job openings increased to 7.523 million that month from an upwardly revised 7.190 million in August. Alongside resilient economic growth and continuing price pressures, the figures reinforce expectations of an imminent Fed rate hike, leaving non-yielding bullion below resistance around $3,970.

Diplomatic efforts to end the eight-month-old US-Iran war have not removed the geopolitical risk premium. On Tuesday, President Donald Trump told the Financial Times that the US had no immediate plans to strike Iran, even as Israeli Prime Minister Benjamin Netanyahu signalled a possible attack later this week. A senior Iranian official, meanwhile, told Reuters that reopening the Strait of Hormuz depended on sanctions being waived and the US naval blockade ending. 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 driven by volatile energy prices, supporting the prospect of further Fed policy tightening.

Wednesday's US data calendar brings the ADP private-sector employment report and the ISM Services PMI into focus for traders. Fresh geopolitical developments could also give gold direction. The main event, however, remains Friday's closely watched US monthly employment release, commonly called the Nonfarm Payrolls (NFP) report, which will shape USD demand and the precious metal's near-term path. Given this fundamental backdrop, it would be prudent to await a sustained break above $3,970 before concluding that XAU/USD has formed a bottom and positioning for a meaningful recovery from last Friday's low, its weakest level since September 2025.

XAU/USD: 4-hour chart

Can XAU/USD Overcome Its Bearish Technical Bias?

Trading below the 100-period Simple Moving Average (SMA) on the 4-hour chart, XAU/USD retains a bearish bias. It also remains beneath all key Fibonacci retracement levels of the decline from the mid-October highs. The first resistance lies at $3,947, the 23.6% retracement, followed by the $3,970 area. Although the Relative Strength Index (RSI) is broadly neutral at 48.94 and the Moving Average Convergence Divergence (MACD) is positive at 6.65, these readings suggest only some stabilisation in momentum, not enough yet to overturn 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% retracement at $4,033 for Gold. Further resistance comes from the 100-period SMA at $4,057, then the 61.8% and 78.6% retracements at $4,072 and $4,127, respectively, ahead of the cycle high near $4,197. If selling pressure intensifies instead, the key structural support lies around the Fibonacci anchor at $3,869, where buyers may try to establish a floor again.

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