US midterm sweep knocks USD lower as Gold retakes $4,000 and Oil slumps

Gold climbs back above $4,000, recovering from the session’s lows of $3,919.
A six-basis-point decline takes US 10-year Treasury yields to 4.904%.
Ahead of NFP, the probability of a December Fed rate hike stays high at 79%.

A sharp retreat in the Greenback lifted Gold (XAU/USD) by nearly 3% on Wednesday, following the Democrats’ sweep in the US midterm elections. Having recovered from an intraday low of $3,919, XAU/USD is trading at $4,047. Attention now turns to Friday’s release of October Nonfarm Payrolls data.

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Can XAU/USD extend its nearly 3% rally as a weaker US Dollar and lower Treasury yields support Gold?

After recouping part of its earlier losses, Wall Street is trading higher. With the preliminary US Q3 GDP reading reaching the 3% threshold, concerns over stricter regulation of artificial intelligence (AI), including a possible ban on data centres, could weigh on the economy.

A weaker US Dollar (USD) has strengthened demand for Gold. The metal has rebounded since touching its year-to-date (YTD) low of $3,870 on October 30.

A Congress dominated by Democrats could weigh on GDP, analysts have argued. Some proposals from the administration might be blocked, potentially slowing the economy.

Expansion in US services-sector activity persisted, but lost pace, the latest data showed. At 54.5, October’s ISM Services Purchasing Managers Index (PMI) fell short of the 54.8 forecast and eased from 54.9 in the previous month. The survey’s employment component increased, whereas new orders and prices paid moderated while staying in expansionary territory.

Private-sector hiring remained steady in October, according to the ADP Employment Change report. Companies added 86K workers, exceeding the forecast of 69K.

Following the election, oil prices eased as expectations grew that the US Congress may remove US President Trump’s war powers. Such a move would not come before the Democratic wave takes over in January 2027. At $87.50 per barrel, West Texas Intermediate (WTI) is down more than 8%.

Markets, meanwhile, assign a 79% probability to a 25-basis-point interest rate increase by the Federal Reserve (Fed) in December. That prospect is unfavourable for Gold, which generally benefits from a low-interest-rate environment.

Lower US Treasury yields are nevertheless lending support to Gold’s advance. A decline of 6 basis points has brought the yield on the US 10-year Treasury note to 4.904%.

Thursday’s jobless claims figures and speeches by Fed officials are next on traders’ radar. Friday then brings the key event: the Nonfarm Payrolls release.

XAU/USD technical outlook: Can Gold reach $4,100 after regaining $4,000?

Although market structure still points to a downtrend in Gold, buying momentum is building as prices approach a crucial resistance trendline. Following a parabolic rise towards the neutral 50 level, the Relative Strength Index (RSI) is close to turning bullish.

A recovery above $4,100 would open the way for XAU/USD to test the confluence of the 100-day and 50-day Simple Moving Averages (SMAs), at $4,204 and $4,215, respectively. A break above those levels would put the 200-day SMA at $4,474 in focus.

A resumption of Gold’s decline requires a break below $4,000. Losing that level would bring the November 3 high, now support at $3,971, into play. Further downside levels are the October 30 year-to-date low of $3,879 and, finally, the April 22, 2025 daily high, which has turned into support at $3,500.

Common questions about Gold

What makes Gold an investment choice?

Widely used both to preserve value and facilitate exchange, Gold has occupied an important place throughout human history. Beyond its lustre and use in jewellery, the precious metal is now commonly regarded as a safe-haven asset, or an investment considered attractive during periods of turmoil. Its independence from any particular issuer or government also underpins its widespread appeal as a hedge against inflation and currency depreciation.

Which buyers hold the largest Gold reserves?

The largest holders of Gold are central banks. To support their currencies during unsettled periods, they typically diversify reserves and purchase Gold, strengthening perceptions of their economies and currencies. Substantial Gold reserves can bolster confidence in a country’s solvency. According to the World Gold Council, central banks increased their reserves by 1,136 tonnes of Gold, valued at around $70 billion, in 2022. No higher annual purchase has been recorded since records began. Emerging-economy central banks, including those of China, India and Turkey, are rapidly expanding their Gold reserves.

How does Gold move relative to other assets?

Both the US Dollar and US Treasuries are major reserve and safe-haven assets, and Gold tends to move inversely to them. A depreciating Dollar typically lifts Gold, allowing investors and central banks to diversify their holdings during turbulent periods. The metal also has an inverse relationship with risk assets: rising equity markets generally weigh on Gold prices, while selling in riskier markets usually supports the precious metal.

Which factors drive Gold prices?

Numerous influences can move Gold prices. Its safe-haven appeal means geopolitical instability or concerns about a severe recession can trigger a rapid price rise. Since Gold offers no yield, lower interest rates generally support it, while a higher cost of borrowing usually puts pressure on the metal. However, because Gold is quoted in dollars (XAU/USD), most price movements hinge on the performance of the US Dollar (USD). Dollar strength tends to restrain Gold prices; a weaker Dollar, by contrast, is likely to lift them.