Gold Jumps as Middle East Conflict Escalates

Gold prices climbed more than 2% to reclaim above $4,000 an ounce level on Wednesday, supported by a weaker US dollar and falling Treasury yields after Democrats secured key victories in the US midterm elections. Markets interpreted the results as potentially increasing the likelihood of political gridlock in Washington and limiting prospects for further fiscal expansion. The dollar fell to a four-week low, while Treasury yields declined across the curve, boosting the appeal of non-yielding bullion. Meanwhile, lingering uncertainty surrounding US-Iran negotiations continued to cloud the geopolitical outlook, with Washington and Tehran still far from reaching a deal to end their conflict. Investors also turned their attention to Friday's US nonfarm payrolls report for further clues on the Federal Reserve's policy outlook. Markets currently price in a 79% chance of a Fed rate hike in December, according to CME’s FedWatch Tool.

Gold prices rose to around $3,950 an ounce on Wednesday, supported by a weaker US dollar and falling Treasury yields as early US midterm results pointed to Democrats gaining ground in both chambers of Congress. Markets interpreted the results as potentially increasing the likelihood of political gridlock in Washington and limiting prospects for further fiscal expansion. Meanwhile, easing oil prices amid hopes of continued US-Iran diplomacy helped alleviate inflation concerns, although Tehran and Washington remained far from a deal to end their conflict. President Donald Trump also declined to rule out renewed US military operations following the elections. Separately, investors awaited Friday's US nonfarm payrolls report for further clues on the Federal Reserve's policy outlook. Markets currently price in a 78% chance of a Fed rate hike in December, keeping expectations of restrictive monetary policy a potential headwind for non-yielding metals.

Gold prices recovered to around $3,965 an ounce on Tuesday, erasing early losses and extending Monday’s 2% gain, as investors welcomed a fresh decline in oil prices ahead of the US midterm elections. Oil reversed earlier gains after President Donald Trump said the US would end its $4 billion aid programme to Israel by year-end. Meanwhile, US Energy Secretary Chris Wright said overnight strikes on Iran’s Qeshm Island had not disrupted regional oil supplies. Lower oil prices could ease inflationary pressures and reduce expectations of further central bank rate hikes. Markets currently price in nearly a 75% chance of a Fed rate hike in December, according to CME’s FedWatch Tool. Meanwhile, US midterm elections are underway, with control of the House and Senate remaining a key focus for investors. Separately, the World Gold Council lowered its forecast for gold investment growth this year to 200 metric tons from 400 tons, while raising its estimate for central bank purchases.