Gold extends rebound above US$4,100 as dollar and yields decline

Bullion has continued its upward trajectory, surpassing the US$4,100 mark, as the US dollar and yields decline following the Democratic victory in the US midterm elections. The precious metal experienced gains of up to 1.9% on Wednesday, trading near US$4,140 an ounce, marking its most significant increase since August. The drop in Treasury yields and weakening greenback, which resulted from the election outcome, played a crucial role in boosting gold prices.

Lower yields typically support gold, as it does not generate interest, while a weaker dollar makes the metal more affordable for investors holding other currencies. Brent crude oil futures also experienced a sharp decline, falling below US$100 a barrel for the first time since early October, as President Trump downplayed the potential for Iran strikes following the election setback.

This rebound marks the largest break gold has seen since a months-long slump, although it remains over a fifth below its pre-war levels, following the surge in energy prices that led to tighter monetary policy. Analysts at Oversea-Chinese Banking Corp expressed cautious optimism, noting that gold is responding positively to favorable macroeconomic conditions.

However, they emphasized that continued easing of the Federal Reserve's tightening expectations and increased investment demand are essential to maintaining the gains.

Traders will monitor the upcoming US payrolls report, scheduled for Friday, as it provides further insights into the state of the economy and potential interest rate changes. Favorable signs of contained inflation would grant the Federal Reserve more room to consider easing monetary policy. Gold prices rose by 1.7% to US$4,127.02 an ounce at 10:32 am in Singapore, while silver increased by 1.8% to US$53.15 after its 5% rise on Wednesday.

Platinum and palladium also saw positive movements. The Bloomberg Dollar Spot Index, which tracks the US currency, decreased by 0.2% after falling 0.4% in the previous session.