Gold Holds Firm Above $4,100 as Dollar & Yields Soften

Key Moments

Election-Driven Dollar Weakness Supports Gold

Gold (XAU/USD) maintains a firm upward tone for a second consecutive session on Thursday, holding above $4,100 and trading near a two-week peak during early European hours. The metal is extending the sharp advance of more than 3.5% recorded in the previous session, described as its largest one-day rise since mid-August.

The US Dollar continues to retreat in the aftermath of the US election outcome, sliding to its weakest level since late September. This persistent pressure on the Greenback has helped bullion extend its recent gains.

Democrats achieved a decisive win in the US midterm elections, removing a significant source of political uncertainty and diminishing expectations that US President Donald Trump will resume military strikes against Iran. Top Senate Democrat Chuck Schumer on Wednesday vowed to push for an end to the Iran war and stated that his party could use control over government funding to pursue that objective. The improved sentiment around reduced geopolitical risk weighs on crude oil, driving prices to a two-month low and easing inflation concerns.

At the same time, expectations that a potential fiscal stalemate in Washington could constrain government spending are putting additional downward pressure on US bond yields. Lower yields are keeping the US Dollar subdued and continue to act as a supportive factor for gold.

Muted Market Reaction Relative to Democratic Victory Scale

Analysts at MUFG/BTMU note that the “scale of the win for the Democrats – which has surpassed any predictions reported prior – has not been matched by the scale of moves in the financial markets,” observing that the Dollar and US Treasury yields have so far only softened modestly. They argue that changes in the political backdrop could still play a decisive role for the US currency: “That would certainly reverse the move lower we are seeing now in the dollar and Treasury yields,” if later developments prompt investors to reprice policy or geopolitical risks.

Conversely, MUFG/BTMU indicate that “if Trump does not attack Iran and he sees this repudiation of his policies from voters as reason to seek a deal, an extension of dollar weakness is much more likely,” emphasizing that the policy response after the elections could determine whether the current Dollar retreat extends or reverses.

Fed Tightening Expectations Largely Intact

Despite the political shift in Washington, investors largely maintain expectations for further interest rate hikes by the US Federal Reserve. According to the CME Group’s FedWatch Tool, markets are still pricing in more than an 80% probability that the Fed will raise borrowing costs in December.

This view has been reinforced by the stronger-than-expected US ADP employment release, which showed that private-sector payrolls increased by 86,000 in October 2026, matching the prior month’s downwardly revised gain of 86,000. Separately, the Institute for Supply ‌Management’s (ISM) Services PMI eased to 54.5 from 54.9 in September, but remained above the 50 mark, indicating continued expansion in the services sector.

Broader Central Bank Tightening Limits Bullion Upside

Gold’s upside potential is also being checked by growing expectations of further rate increases by other major central banks, which typically make non-yielding assets such as bullion relatively less attractive.

The Bank of England (BoE) is widely anticipated to raise its main policy rate by 25 basis points at its meeting later today. Minutes from the Bank of Japan’s (BoJ) September gathering show that policymakers discussed the need to continue and potentially accelerate the pace of rate hikes. In addition, markets are assigning a higher probability to December rate hikes by both the European Central Bank (ECB) and the Swiss National Bank (SNB).

These tightening expectations across multiple jurisdictions suggest caution is warranted before assuming a sustained extension of gold’s current rally.

Key Upcoming Catalysts: NFP and Fed Speakers

Market participants are likely to be cautious ahead of the release of the closely watched US Nonfarm Payrolls (NFP) report on Friday. The labor market data, together with upcoming remarks from influential Federal Open Market Committee (FOMC) members, will be scrutinized for further clarity on the Fed’s policy outlook and could have a meaningful impact on US Dollar dynamics in the near term.

Beyond US data and Fed communication, additional developments related to the Middle East crisis may also generate volatility and influence gold prices.

Technical Picture: XAU/USD Remains Constructive but Overbought

On the four-hour chart, XAU/USD preserves a constructive technical stance following Thursday’s move above the 23.6% Fibonacci retracement of the August-October downswing and the 200-period Simple Moving Average (SMA). Momentum indicators are signaling strong but stretched conditions: the Relative Strength Index (RSI) stands at 75.77 in overbought territory, while the Moving Average Convergence Divergence (MACD) line is advancing above its signal line with a positive and widening histogram. This combination points to persistent buying interest even as the ascent appears mature.

Near term, traders are focused on whether bulls can decisively overcome the 38.2% Fibonacci retracement level at $4,186 without sparking a corrective phase from overbought conditions. Above that zone, the next resistance area is aligned with the 50.0% retracement at $4,283, followed by $4,380. The broader Fibonacci resistance band extends toward $4,518 and $4,695, which delineates the upper boundary for the medium-term recovery.

On the downside, the 200-period SMA around $4,124 is the first notable support, followed by the 23.6% retracement near $4,065. A sustained break below this latter level would bring the structural floor near the recent cycle trough around $3,871 into view.