Gold hits 2-week high as dollar yields, oil falls after US midterms
BENGALURU - Gold prices extended their post-US midterm election rally to a more than two-week high on Thursday, as the US dollar and Treasury yields weakened, while a sharp drop in oil prices in the previous session eased inflation concerns.
Gold prices surged on Thursday, driven by a weaker U.S. dollar and falling Treasury yields, as investors pondered the potential impact of the Democratic victory in the U.S. midterm elections on the Iran conflict. Spot gold climbed 1.6% to $4,125.68 an ounce, while gold futures rose 1.5% to $4,134.62 an ounce. Meanwhile, the U.S. dollar index slipped 0.1% to 101.47.
The Democratic triumph dealt a blow to the Trump administration, sparking a broad sell-off in U.S. bond yields and the dollar. Treasury yields declined across all maturities on Wednesday and continued their downward trend on Thursday. Simultaneously, the greenback experienced a 0.4% decline in the previous session, followed by further losses.
Lower yields bolster gold's appeal, as it does not yield interest income, and a weaker dollar makes the precious metal more attractive to foreign buyers. ANZ analysts noted that expectations of curtailed Trump's tax cuts and spending plans due to the new political landscape also contributed to the bond market's decline. However, they cautioned that government borrowing had been a key driver of gold's strength over the past year, implying that fiscal constraints could erode one of the primary motivations behind the metal's long-term allure.
Oil prices remained above $95 a barrel, having tumbled sharply on Wednesday, breaching the $100 mark for the first time since early October. President Trump appeared to downplay the likelihood of renewed strikes against Iran following the election setback, easing concerns about additional escalation and potential disruptions to energy supplies.
Gold's resurgence marked its strongest break yet from a months-long decline, although the precious metal remained more than 20% below its levels prior to the U.S.-Iran war's inception in late February. The ongoing conflict had driven energy costs higher and contributed to inflation, leading to tighter monetary policy that weighed on the outlook for non-yielding assets like gold.
Investors now anticipate Friday's U.S. nonfarm payrolls report, which could provide fresh insights into labor market conditions and the Federal Reserve's interest-rate policy trajectory. The central bank is widely expected to raise rates in December to curb inflationary pressures, with robust job market data offering additional room for the Fed to lift borrowing costs.
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