Gold rises to near $3,950 as traders brace for US midterm election
- Gold price jumps to near $3,950 in Tuesday’s early Asian session, up 1.75% on the day.
- Iran says talks to end the war continue after a session ends with no breakthrough.
- Uncertainty surrounding US midterm elections could boost safe-haven flows, supporting Gold.
Gold price (XAU/USD) rises to around $3,950 during the early Asian session on Tuesday. The precious metal rebounds as falling oil prices have tempered inflation worries. Traders will closely monitor US midterm elections later this week.
Tehran stated on Monday that discussions between the US and Iran to end their eight-month conflict are still ongoing. This follows several days of negotiations between Iranian officials and Qatari mediators, which resulted in revised proposals but failed to make a major breakthrough, per Reuters.
Iran's Foreign Ministry spokesperson Esmaeil Baghaei said the plan Iran had submitted in September to end the war remained the focus of discussions. However, Baghaei also confirmed remarks attributed to Foreign Minister Abbas Araqchi on Saturday suggesting that the proposal could be condensed.
“Weaker oil prices have provided some relief … in terms of reducing inflation concerns. But the market is still expecting a December rate hike from the Fed, although those odds have lessened a little bit over the last couple of trading sessions,” said Peter Grant, vice president and senior metals strategist at Zaner Metals.
Tuesday’s US midterm elections raise the prospect of a broader narrative swing back to inflation and deficit woes. This, in turn, could boost a safe-haven asset such as Gold in the near term. Polling shows Democrats are favored to win the House, while a majority in the Senate is more uncertain.
Markets are now pricing in nearly 73% odds of a US rate hike in December, down from 80% a week ago, according to the CME FedWatch Tool.
Gold support offsets oil headwinds as regional risks persist
Analysts at HSBC highlight that “a stable US Dollar should help temper risks to gold,” which they say “remains well supported by diversification flows from central bank purchases, as well as geopolitical and fiscal uncertainty.” In contrast, the bank cautions that “we expect oil prices to remain volatile as they respond to changes in the news flow,” leaving the energy complex as a persistent source of uncertainty.
In equities, HSBC notes that “South Africa benefits from a bullish outlook for gold, but geopolitical uncertainty remains a drag on the region,” while “elevated oil prices remain headwinds for the region.” The bank adds that EM Asia “is resilient given its strategic role in the global AI supply chain, but we have become more selective,” reflecting a more discriminating stance despite the region’s structural strengths.
At the sector level, HSBC argues that “the sector is benefitting from multiple positive trends that are lifting demand and prices,” pointing out that “valuations are the lowest among all sectors, with many large companies reporting strong cash flows and relatively high dividends.” However, the bank warns that “regional conflicts are likely to continue for the rest of the year, with damaged infrastructure delaying a swift return to normality,” suggesting that geopolitical risks will remain an important overlay on otherwise supportive fundamentals.
Technical Analysis: Gold keeps a bearish vibe under the 100-day SMA
In the daily chart, XAU/USD remains under clear bearish pressure, holding below the 20-period Bollinger Bands simple moving average (SMA) and the 100-day SMA, which together hint at a capped tone while price consolidates near recent lows. The Relative Strength Index (14) at 36.88 stays just above oversold territory, suggesting weak downside momentum rather than outright exhaustion, leaving room for further softening while these overhead averages are not reclaimed.
On the topside, initial resistance is located at the Bollinger midline around $4,090, with the 100-day SMA at $4,210 and the upper Bollinger band near $4,255 forming a wider supply zone should any recovery attempt gain traction. On the downside, the lower Bollinger band at $3,920 offers the nearest support; a decisive break beneath this floor would expose fresh lows, while holding above it would keep XAU/USD confined to a bearish range beneath the clustered moving-average resistance.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
Author
Lallalit Srijandorn
FXStreet
Lallalit Srijandorn is a Parisian at heart. She has lived in France since 2019 and now becomes a digital entrepreneur based in Paris and Bangkok.
