Gold jumps 2.4% after Democrats win both chambers of US Congress
Key Facts
The move came after the US midterm elections resulted in Democrats winning majorities in both chambers of Congress, according to the Associated Press. The dollar and yields fell after the result, supporting the non-yielding metal. Kyle Rodda, senior financial market analyst at Capital.com, said gold benefited from their declines. He added that this was linked to expectations that gridlock between the executive and legislative branches could slow US spending.
Rodda said the view that political gridlock could slow spending was behind the declines in the dollar and yields, according to Reuters. He said gold benefited from "lower yields and the dollar, due to the belief that gridlock that may emerge between the executive and legislative branches in the United States could slow the scale of spending." The World Gold Council says US election results have not historically been associated with a consistent or significant impact on gold's performance. The council said the economic, fiscal and monetary policies that follow elections matter more than the outcome on polling day. It said changes to AI regulation and war financing, alongside an expansion of the US administration's use of executive power if Democrats win control, could support the metal.
On the monetary outlook, CME's FedWatch tool indicated that traders see a 78% probability of a US rate hike in December, according to Reuters. This estimate makes the path of interest rates important in assessing gold's appeal, as the metal offers no periodic yield. Reuters had linked weaker oil to easing inflation concerns and stronger expectations that the Federal Reserve may not need to keep rates high for long. It said this supports the appeal of non-yielding bullion. In the previous session, spot gold fell 0.5% in a late snapshot, after dropping during the session to $3,893.31 an ounce.
Gold's move coincided with volatility in other markets, amid investor concern that shares linked to AI had risen too far, according to the Associated Press. In a Wednesday morning snapshot, the 10-year US Treasury yield stood at 4.96%, compared with 4.91% late Monday. The agency linked the yield's rise to a report showing that job openings at the end of September exceeded economists' expectations. West Texas Intermediate crude also rose 0.2% to $96.28 a barrel in early trading. EL7 data show that spot gold closed at $3,930.325 on November 3 and then at $4,026.665 on November 4.
Stephen Brown of Capital Economics does not see the Democrats' victory as significantly changing the near-term policy outlook, saying the party does not have a majority that can overcome Senate obstruction and the president has veto power. In a separate reading of demand, the World Gold Council forecast that Indian gold demand would reach a six-year low in 2026, as high prices weigh on jewelry sales and investment demand moderates. Investors are looking ahead to the US October employment situation report, due on November 6 at 08:30 a.m. Eastern Time. The Bureau of Labor Statistics has scheduled the release of the October Consumer Price Index for November 10 at the same time. Jobs data are a key release investors are watching for signals on the Federal Reserve's policy path, according to Reuters.