Gold hits a two-week high as dollar, Treasury yields ease after US midterm elections

Gold prices surged nearly 2% on Thursday, reaching a two-week high, as a result of a weaker US dollar and lower US Treasury yields following a Democratic midterm election victory. Spot gold increased by 1.9% to $4,134.83 per ounce by 0316 GMT, marking its highest level since October 22. Bullion climbed about 3.4% on Wednesday, its largest daily gain since August 19. US gold futures for December delivery also rose 1.8% to $4,144.20.

The weaker dollar and reduced Treasury yields contributed to gold's recovery above the key $4,000 level. Linh Tran noted that if investment flows and yield movements continue to support the market, gold could stabilize above $4,000, potentially opening the way for a recovery toward $4,200, followed by $4,400. The dollar dipped on Thursday as a result of the Democrats' decisive win in US midterm elections, which alleviated a key source of uncertainty and stimulated a rally in global equities. A weaker dollar makes gold more affordable for holders of other currencies.

Meanwhile, the yield on benchmark 10-year US Treasuries decreased by 6 basis points overnight and further by a basis point in early Tokyo trade, reaching 4.87%. Market participants are now anticipating the US nonfarm payrolls report on Friday to assess the Federal Reserve's monetary policy outlook. Currently, traders believe there is an 82% probability that the Fed will raise rates in December, according to CME's FedWatch tool.

Higher interest rates diminish the opportunity cost of holding non-yielding bullion, thereby decreasing its attractiveness to investors. Citigroup has a price target of $4,500 per ounce for gold, as it anticipates significant upside potential if the Strait of Hormuz reopens and the Yemen/Saudi conflict de-escalates by year-end. Among other precious metals, silver increased by 1.7% to $53.12 per ounce, platinum rose by 2.1% to $1,527.65, and palladium climbed by 2.6% to $1,030.14.