Uncertainty could result in selling pressure for gold

Gold prices may experience renewed selling pressure due to uncertainty following Democrats' control of both US houses of Congress, according to YLG Bullion & Futures. Worries over potential military escalation in the Middle East and emergency powers to maintain President Trump's leadership could trigger panic selling in financial markets, affecting gold and other assets.

If a major military action or nuclear attack occurs, severe market disruption could lead investors to liquidate holdings across multiple asset classes, causing prices to plummet. However, a Democratic victory could also limit military actions and ease tensions in the Middle East, potentially reducing pressure on interest rates and benefiting gold prices.

Gold prices are currently in a sideways-downward trend, and a de-escalation could push oil prices and inflation lower, creating more favorable conditions for gold to recover. If geopolitical developments and the US election outcome create further challenges, prices could drop towards key support at $3,800 an ounce. A short-term recovery is expected to face resistance at around $4,200 an ounce.

Despite short-term volatility, central banks' continued gold purchases in the third quarter, totaling 321 tonnes, remain a longer-term support for gold.