Gold Rises as Dollar Weakens

Gold prices fell toward $4,050 an ounce on Friday as the US dollar strengthened following a stronger-than-expected nonfarm payrolls report, reinforcing expectations that the Federal Reserve could raise interest rates at its policy meeting next month. The US economy added 165,000 jobs in October, well above market expectations of 65,000, while the unemployment rate unexpectedly declined to 4.1%. Employment figures for the previous two months were also revised upward by a combined 84,000. Adding to the hawkish outlook, average hourly earnings rose by 0.4%, exceeding forecasts of 0.3%, while a renewed increase in crude oil prices further fueled inflation concerns. Despite Friday’s pullback, gold remained up more than 4% for the week, supported by safe-haven demand following a sweeping Democratic victory in the US midterm elections, which prompted investors to rotate out of AI stocks and seek defensive assets.

Gold slipped below $4,050 an ounce on Friday but was still on track to gain more than 4% for the week following a sweeping Democratic victory in the US midterm elections. Markets expect Democrats to push for an end to the Iran conflict, which could drive oil prices lower, ease inflationary pressures and reduce the likelihood of more aggressive interest rate hikes. Investors also anticipate that a divided government could constrain President Donald Trump’s fiscal agenda, limiting additional government spending and borrowing while further easing inflation concerns. Meanwhile, the global equity selloff intensified amid fears that Democrats could impose stricter regulations on the artificial intelligence industry and curb data center expansion, prompting some liquidity-driven selling in precious metals. However, these pressures were offset by stronger demand for safe-haven bonds, which pushed yields lower and supported demand for non-yielding assets such as gold.

Gold rose more than 1% to above $4,120 an ounce on Thursday, extending its post-election rally to the highest level since October 21. The advance was supported by a weaker US dollar, which remained near a one-month low, while oil prices stayed below $100 a barrel, easing inflation concerns. Bullion surged more than 3% on Wednesday, its sharpest daily gain since August 19, benefiting from falling energy prices, lower Treasury yields and easing concerns over inflation and interest rates. The unexpected Democratic takeover of both the House and Senate also weighed on the dollar and yields, as it reduces the likelihood of further deficit-expanding legislation under the Trump administration and may limit the risk of further escalation in the Iran war. Meanwhile, traders are pricing in an approximately 80% probability of a Fed rate hike in December, according to the CME FedWatch Tool. Investors are now turning their attention to Friday's US nonfarm payrolls report.