Gold eases from two-week top; holds comfortably above $4,100 as USD sticks to bearish tone

• Gold extends the rally further beyond $4,100 as the US elections-driven USD selling remains unabated.
• Falling oil prices ease inflation fears and weigh on US bond yields, further supporting the commodity.
• Hawkish central bank expectations could cap the bullion as traders keenly await the US NFP report.

Gold (XAU/USD) retreats slightly from a two-week high touched during Thursday’s Asian session, albeit it clings to gains for the second straight day and currently trades around $4,130. The US Dollar (USD) extends the fallout from US election results, dropping to a fresh low since late September and assisting the commodity in building on the previous day’s strong rally of over 3.5% – its biggest single-day rise since mid-August.

Democrats’ overwhelming victory in the US midterm elections cleared a major source of uncertainty and lowered expectations that US President Donald Trump will resume military strikes against Iran. In fact, Top Senate Democrat Chuck Schumer vowed on Wednesday to push for an end to the Iran war and said that his party could use control over government funding to press for that goal. The optimism drags crude oil prices to a two-month low, easing inflation fears. Moreover, expectations that a fiscal gridlock in Washington could limit government spending further put downward pressure on US bond yields, which keeps USD depressed and acts as a tailwind for the commodity.

Dollar reaction muted despite scale of Democratic win

Analysts at MUFG/BTMU observe that the “scale of the win for the Democrats – which has surpassed any predictions reported prior – has not been matched by the scale of moves in the financial markets,” with the Dollar and US Treasury yields only modestly softer so far. They argue that a shift in the political backdrop could still prove pivotal for the currency: “That would certainly reverse the move lower we are seeing now in the dollar and Treasury yields,” if subsequent developments were to reprice policy or geopolitical risks. Conversely, MUFG/BTMU suggest that “if Trump does not attack Iran and he sees this repudiation of his policies from voters as reason to seek a deal, an extension of dollar weakness is much more likely,” underscoring how the post-election policy response may determine whether the current Dollar pullback deepens or reverses.

Despite the political shift, expectations for further tightening by the US Federal Reserve (Fed) remain largely intact. According to the CME Group’s FedWatch Tool, traders are still pricing in over an 80% chance that the US central bank will raise borrowing costs in December. The bets were reaffirmed by the better-than-expected US ADP report, which showed that private-sector employment increased by 86,000 in October 2026, matching the previous month’s downwardly revised reading. Separately, the Institute for Supply ‌Management’s (ISM) Services PMI dipped to 54.5 last month, from 54.9 in September, but remained above the 50 threshold that indicates continuous expansion.

Moreover, bets for interest rate hikes by other major central banks might contribute to capping gains for the non-yielding Gold. In fact, the Bank of England (BoE) is widely expected to raise its main interest rate by 25 basis points (bps) at its policy meeting later today. Meanwhile, minutes from the September Bank of Japan (BoJ) revealed that policymakers debated the need for continued and potentially faster-paced rate hikes. Adding to this, markets are pricing in a greater chance of a December rate hike by the European Central Bank (ECB) and the Swiss National Bank (SNB). This, in turn, warrants some caution before positioning for any further appreciating move for the precious metal.

Traders might also opt to wait for the release of the closely watched US monthly employment details, popularly known as the Nonfarm Payrolls (NFP) report on Friday. The crucial data, along with speeches from influential FOMC members, will be looked at for more cues about the Fed’s future policy path and drive USD demand in the near term. Apart from this, further developments surrounding the Middle East crisis could infuse some volatility and provide some impetus to the Gold price.

XAU/USD 4-hour chart

Technical Analysis

In the four-hour chart, the XAU/USD pair keeps a constructive bias following Thursday’s breakout above the 23.6% Fibonacci retracement level of the August-October downswing and the 200-period Simple Moving Average (SMA). Meanwhile, the Relative Strength Index (RSI) at 75.77 is in overbought territory, and the Moving Average Convergence Divergence (MACD) line is advancing above its signal with a positive, expanding histogram, hinting that bullish pressure persists even as the rally looks mature.

Hence, the immediate focus remains on whether bulls can clear the 38.2% Fibo. retracement at $4,186 without triggering a corrective pullback from overbought conditions. The next hurdle aligns with the 50.0% level at $4,283 and then $4,380, while the broader Fibonacci band up to $4,518 and $4,695 caps the medium-term recovery path. On the downside, the 200-period SMA around $4,124, followed by the 23.6% level at $4,065, could protect the immediate downside. A break below the latter would expose the structural floor closer to the recent cycle low near $3,871.

Register a Revolut Business Account