Uncertainty could result in selling pressure for gold

Gold prices may experience renewed selling pressure as a result of political uncertainty following US Democrats' control of both the House of Representatives and Senate. Warut Rungkham, head of analysis at YLG Bullion & Futures, expressed concerns that a defeat for President Donald Trump could lead to increased military action in the Middle East, possibly invoking emergency powers to maintain his power.

Geopolitical tensions and speculation about possible nuclear weapon use could trigger panic selling across financial markets, putting gold and other assets under renewed pressure, he said. A Democratic victory could constrain the administration's military actions, helping to ease tensions in the Middle East, potentially reducing pressure on interest rates and creating more favorable conditions for gold to recover.

However, if geopolitical developments and the US election outcome create further obstacles, prices could plunge towards support at $3,800 an ounce, according to Warut. Central banks' continued purchases of gold remain a longer-term source of support for the precious metal, with the World Gold Council reporting a net 321 tonnes added to reserves in the third quarter, a 42% increase year-on-year.