FX.co ★ Fixy | XAU/USD, GOLD

The price of gold (XAU/USD) stabilized during the first half of Thursday’s European trading session, following notable weekly gains. Having previously touched a two-week high, it is currently holding above the $4,100 level. This pause in gold’s upward momentum coincided with a slight recovery in the US dollar, which had earlier fallen to its lowest level since late September—a decline driven by the US midterm elections—before attempting to stabilize. The Democratic victory has removed significant political uncertainty and substantially lowered the likelihood of a new US military strike against Iran. Senate Majority Leader Chuck Schumer confirmed that the Democrats intend to leverage their newfound control over federal funding to push for a diplomatic resolution to the conflict in the Middle East. This optimism regarding a de-escalation of tensions pushed global oil prices to a two-month low, easing concerns about a resurgence in inflation. Meanwhile, market expectations of potential legislative gridlock in Washington—which could constrain future fiscal spending—have exerted downward pressure on US Treasury yields, limiting the dollar’s performance and providing potential support for non-interest-bearing gold. Strategists at MUFG/BTMU noted that, although the Democratic victory exceeded pre-election expectations, the initial reactions across financial and bond markets remained relatively moderate. They believe that the medium-term trajectory of the dollar depends on how the government responds to the election results. If political tensions or geopolitical risks escalate once again, the dollar could reverse its recent decline; conversely, if the government continues to pursue a diplomatic approach, the dollar may remain weak. Meanwhile, market expectations regarding the Federal Reserve’s monetary policy path continue to temper strong bullish bets on gold. The CME Group’s FedWatch tool indicates that the money market still assigns an over 80% probability to a 25-basis-point interest rate hike at the December meeting. This hawkish outlook is supported by several indicators: the ADP employment report for October showed a steady gain of 86,000 private-sector jobs, while the Institute for Supply Management (ISM) services Purchasing Managers' Index (PMI) reached a robust 54.5, signaling continued expansion in the services sector. Outside the United States, major central banks around the world are entering a monetary tightening cycle, which adds further pressure on gold prices. Markets widely anticipate that the Bank of England will raise interest rates by 25 basis points, while the minutes from the Bank of Japan’s September meeting revealed that the bank seriously discussed accelerating the pace of its interest rate hikes. Furthermore, market pricing reflects an increasing likelihood of interest rate hikes by both the European Central Bank and the Swiss National Bank in December. Rising global yields have increased the opportunity cost of holding non-interest-bearing assets like gold, prompting traders to exercise greater caution ahead of Friday’s key U.S. non-farm payrolls report and scheduled speeches by Federal Open Market Committee (FOMC) officials.

From a technical perspective, the four-hour chart continues to signal an upward trend, with the price of gold (XAU/USD) having decisively broken above both the 200-period simple moving average (SMA) and the 23.6% Fibonacci retracement level of the decline seen between August and October. Although the Relative Strength Index (RSI) has reached 75.77—indicating that the asset has entered overbought territory—the Moving Average Convergence Divergence (MACD) indicator continues to expand above its signal line, and the histogram remains positive, confirming that buyers currently remain in control. The primary upside target lies at the 38.2% Fibonacci retracement level (approximately $4,186); a successful breach of this level could see gold prices target the 50.0% Fibonacci retracement level ($4,283) and the 61.8% Fibonacci retracement level ($4,380). On the downside, dynamic support is found near the 200-period SMA ($4,124), followed by the 23.6% Fibonacci support level ($4,065). Should this support level be decisively breached, gold prices could fall further, approaching their recent cyclical low (3,871 USD).