Gold (XAU/USD) maintains a bullish bias during American trading hours on Wednesday as traders digest the US midterm election results. At the time of writing, XAU/USD trades around $4,038, up nearly 3.0% on the day.
The metal rallied sharply earlier in the day after Democrats secured control of both houses of Congress, setting the stage for political gridlock in Washington. The election outcome means the Trump administration will need Democratic support to pass new legislation, approve spending packages, introduce further tax cuts or raise the debt ceiling.
The resulting political and fiscal uncertainty has revived the metal’s safe-haven appeal while weighing on the US Dollar, making bullion cheaper for buyers holding other currencies.
US economic data offers some support to the Greenback. The ADP report showed private-sector employment rose by 86K in October, beating the 69K forecast, while September’s gain was revised down to 86K from 90K. Meanwhile, the ISM Services Purchasing Managers Index (PMI) eased to 54.5 from 54.9, missing expectations of 54.8 but remaining comfortably above the 50 threshold that signals expansion.
The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, trades around 101.45, down 0.40% on the day, after touching an intraday low of 101.21, its lowest level since September 30.
Gold rebound comes as US fiscal risks rise but Fed path seen unchanged
The Yellow metal may struggle to sustain its rebound as ongoing tensions in the Middle East keep energy prices high and inflation risks elevated, leaving markets positioned for additional interest rate hikes by the Federal Reserve (Fed) and other major central banks. Higher borrowing costs weigh on the non-yielding metal by increasing the opportunity cost of holding it.
Traders price in an 82% chance of a December rate hike, according to the CME FedWatch Tool. The prospect of further tightening could also cushion the US Dollar’s decline.
Attention now turns to upcoming US employment data for fresh clues on the Fed’s policy outlook, with weekly Initial Jobless Claims due on Thursday and Nonfarm Payrolls (NFP) on Friday.
Technical Analysis: XAU/USD approaches mid-Bollinger Band
On the daily chart, XAU/USD remains mildly bearish in the near term as price holds below the 20-day simple moving average (SMA) middle Bollinger band at $4,074. The pair also faces overhead resistance at the upper Bollinger band near $4,253, suggesting rallies remain capped while momentum stays mixed, with the Relative Strength Index (RSI) recovering to 46 in neutral territory and the Moving Average Convergence Divergence (MACD) indicator negative but stabilizing.
On the downside, immediate support emerges at the $4,000 psychological level, followed by the lower Bollinger Band near $3,894 and the yearly low of $3,870 touched last week. On the topside, a close back above the mid-Bollinger band at $4,074 would ease downside pressure, though stronger resistance waits at the upper band near $4,253 and then the broader structural barrier at $4,400.
