- Gold gains as Democrats’ victory fuels fiscal concerns and revives demand for the metal.
- Expectations of another Fed rate hike in December could limit further gains.
- XAU/USD faces immediate resistance at the 20-day SMA near $4,074, while the RSI recovers toward the neutral level.
Gold (XAU/USD) rallies on Wednesday, reclaiming $4,000 as the US midterm results set the stage for a divided government and raise the risk of political gridlock in Washington. At the time of writing, XAU/USD trades around $4,041, up 3% on the day.
Democrats have seized control of both houses of Congress, meaning the Trump administration will need their support to pass new laws, approve spending packages, introduce further tax cuts or raise the debt ceiling.
The resulting political uncertainty revives the metal’s safe-haven appeal while weighing on the US Dollar, making bullion cheaper for buyers holding other currencies. The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, trades around 101.40, down 0.44% on the day and near five-week lows.
Gold rebound comes as US fiscal risks rise but Fed path seen unchanged
The Yellow metal may struggle to sustain its rebound as ongoing tensions in the Middle East keep energy prices high and inflation risks elevated, leaving markets positioned for additional interest rate hikes by the Federal Reserve (Fed) and other major central banks. Higher borrowing costs weigh on the non-yielding metal by increasing the opportunity cost of holding it.
Strategists at Societe Generale argue that the Democrats’ blue wave in the US “should not change the direction of travel for the Fed, at least not in the short term,” with “a 25bp rate increase in December” still seen as “a high probability event.” Meanwhile, the bank’s economics team warns of a greater risk of a government shutdown amid uncertainty over the US fiscal outlook, which may help explain Gold’s rebound above $4,000.
Traders price in an 82% chance of a December rate hike, according to the CME FedWatch Tool. The prospect of further tightening could also cushion the US Dollar’s decline.
Attention now turns to US economic data for fresh clues on the Fed’s policy outlook. Wednesday brings the ADP Employment Change report and October’s ISM Services PMI, followed by weekly Initial Jobless Claims on Thursday and Nonfarm Payrolls (NFP) on Friday.
Technical Analysis: XAU/USD approaches mid-Bollinger Band
On the daily chart, XAU/USD remains mildly bearish in the near term as price holds below the 20-day simple moving average (SMA) middle Bollinger band at $4,074. The pair also faces overhead resistance at the upper Bollinger band near $4,253, suggesting rallies remain capped while momentum stays mixed, with the Relative Strength Index (RSI) recovering to 46 in neutral territory and the Moving Average Convergence Divergence (MACD) indicator negative but stabilizing.
On the downside, immediate support emerges at the $4,000 psychological level, followed by the lower Bollinger Band near $3,894 and the yearly low of $3,870 touched last week. On the topside, a close back above the mid-Bollinger band at $4,074 would ease downside pressure, though stronger resistance waits at the upper band near $4,253 and then the broader structural barrier at $4,400.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
US Dollar Price Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Japanese Yen.
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
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