Gold prices advanced on Thursday as the US dollar and Treasury yields declined following the Democratic Party’s victory in the US midterm elections, while investors assessed the outlook for the conflict with Iran and upcoming US employment data.
At 04:50 ET (09:50 GMT), spot gold increased 1.6% to $4,125.68 per ounce, while US gold futures gained 1.5% to $4,134.62 per ounce.
The US Dollar Index, which measures the currency against a basket of major international currencies, declined 0.1% to 101.47.
The movements followed election results that gave Democrats control of both chambers of Congress, prompting investors to reassess US fiscal policy, interest rate expectations and geopolitical developments.
Dollar and Treasury Yields Decline Following Election Results
The Democratic Party’s gains in the House of Representatives and Senate contributed to a decline in the US dollar and Treasury yields across different maturities.
Analysts at ANZ attributed part of the movement in bond markets to expectations that a Democratic-controlled Congress could limit President Donald Trump’s proposed tax reductions and government spending plans.
Changes to the outlook for fiscal policy can influence expectations for government borrowing, inflation and interest rates.
Lower Treasury yields generally reduce the opportunity cost of holding gold, which does not generate interest income.
A weaker US dollar can also make dollar-denominated bullion less expensive for buyers using other currencies.
These factors contributed to Thursday’s increase in precious metal prices.
Gold Remains Below Levels Recorded Before Iran Conflict
Despite Thursday’s advance, gold prices remained more than 20% below their levels before the conflict between the United States and Iran began in late February.
The conflict has contributed to higher energy costs and inflationary pressures, influencing expectations for monetary policy.
Rising energy prices can affect consumer and business costs, potentially prompting central banks to maintain or increase interest rates.
Higher borrowing costs can weigh on demand for non-yielding assets such as gold.
The recent decline in Treasury yields and the US dollar provided support for bullion, although the broader interest rate outlook remained an important consideration for investors.
Oil Prices Stabilise Above $95 After Previous Session’s Decline
Energy markets also responded to the US election results and developments involving Iran.
Brent crude futures traded above $95 per barrel on Thursday after oil prices declined sharply during Wednesday’s session.