Gold edges higher as US midterm election results trigger sudden USD fall

Gold (XAU/USD) continued its rise, breaking past the $4,000 psychological barrier just before the European trading day commenced. This upward movement was triggered by the results of the US midterm elections, which introduced political uncertainty and negatively impacted the US Dollar (USD). Democrats' victories in the House and Senate hinted at potential gridlock in Washington, limiting government spending.

Furthermore, the outcome might have negatively influenced tech stocks and economic growth, increasing demand for safe-haven assets like gold and causing US bond yields to fall. Despite expectations of hawkish actions from the US Federal Reserve, gold failed to capitalize on this opportunity. According to the CME Group's FedWatch Tool, there was an 80% probability that the central bank would raise interest rates again in December.

The Federal Reserve's decision was supported by the Labor Department's Job Openings and Labor Turnover Survey (JOLTS) report, which revealed stable hiring in September, with 7.523 million job openings, up from the revised 7.190 million in August. This, coupled with robust economic growth and persistent price pressures, reinforced the notion of an imminent Fed rate hike, keeping gold prices below the $3,970 resistance level.

Geopolitical tensions, including the ongoing conflict between the US and Iran, continued to influence the market, as President Trump reassured the Financial Times that the US had no immediate plans to attack Iran, despite Israeli Prime Minister Benjamin Netanyahu suggesting an attack later in the week. Meanwhile, Iran's Islamic Revolutionary Guard Corps warned that four tankers were destroyed by mines in the Strait of Hormuz, heightening oil supply risks and inflation concerns due to volatile energy prices.

This further bolstered the case for gold as a safe-haven asset. The focus now shifted to the upcoming US economic data, including the ADP report on private-sector employment and the ISM Services PMI, as well as the eagerly anticipated Nonfarm Payrolls (NFP) report on Friday, which would impact USD demand and the short-term direction of gold.

However, traders were advised to wait for a sustained move above the $3,970 level before confirming the bottoming out of the XAU/USD pair and positioning for a potential recovery. The XAU/USD pair was currently trading below the 100-period Simple Moving Average (SMA) on the 4-hour chart and all key Fibonacci retracement levels of the recent decline from the mid-October highs, with the 23.6% retracement at $3,947 acting as immediate resistance before the $3,970 zone.

The Relative Strength Index (RSI) stood at 48.94, indicating neutrality, while the Moving Average Convergence Divergence (MACD) was positive at 6.65, suggesting stabilizing momentum but not strong enough to overcome the prevailing downside trend. A sustained strength above the $3,970 level would expose the 38.2% retracement at $3,995 before aiming for the 50.0% retracement at $4,033.

The next major support lies at the Fibonacci anchor around $3,869, where buyers might attempt to reassert a floor if the bearish pressure persists.