Gold slips below $3,950 as US Dollar strengthens, with focus on US midterm elections

• At around $3,930, gold trades lower in early Asian dealing on Wednesday.
• Gold comes under pressure as the US Dollar strengthens and yields rise.
• Q3 central bank gold purchases reached their fastest pace since the end of 2024, according to the World Gold Council.

Near $3,930 in Wednesday’s early Asian trading, Gold (XAU/USD) is retreating as a stronger US dollar (USD) and rising Treasury yields weigh on the metal. The outcome of the US midterm elections is awaited for indications of the fiscal policy outlook.

Uncertainty surrounding a possible US-Iran deal and the midterm election results has accompanied a modest rise in the US Dollar, while Treasury yields have also edged up. Together, these moves put pressure on the dollar-denominated commodity. The US election results remain firmly in focus: polls and nonpartisan analysts favour Democrats taking the House from Republicans, although control of the Senate is still uncertain.

Fawad Razaqzada, market analyst at forex.com, said: “A Democratic clean sweep could potentially put pressure on the US dollar by making it harder for the administration to pass law, including measures related to the debt ceiling. If the dollar falls, that’s one way gold could potentially find some support,”

Central bank gold buying accelerated in the third quarter (Q3) to its fastest pace since the end of 2024, according to the World Gold Council’s report published on Tuesday. Purchases gathered pace despite pressure on the metal from higher oil prices and interest rates, with institutions adding a net 321 tons over the three months to September. The World Gold Council nevertheless lowered its forecast for growth in gold investment this year from its previous estimate of 400 tons to 200 metric tons.

Gold decline appears excessive despite expectations of higher US rates

Commerzbank analysts point to gold’s recent losses, observing that the price "fell by 3.7% on Friday to USD 3,870 per troy ounce, its lowest level in more than a year," resulting in "a substantial monthly loss of almost 7% in October, which was even slightly larger than that recorded in September." Changes in monetary policy expectations account for much of the recent pressure, in their view: "given the robust US economy and inflation running well above target, a further rate hike in December is highly likely." Explaining the impact on gold, Commerzbank says that "expectations of rate hikes have led to rising bond yields and (real) interest rates, which in turn increase the opportunity cost of holding gold and, conversely, reduce the attractiveness of holding gold."

Yet interest rate developments "can only explain the current fall in the price of gold to a limited extent," the bank cautions. It notes that "following last week’s Fed meeting – at which, as expected, the Fed left interest rates unchanged – interest rate expectations have eased and both nominal and real bond yields have subsequently fallen." Commerzbank’s conclusion against this backdrop is that "we consider the price decline in gold to be excessive and unwarranted. The arguments in favour of a rising gold price remain valid."

Technical Analysis: Gold remains under pressure below the 100-day SMA

A Relative Strength Index (RSI) reading of 36.09 leaves XAU/USD just above oversold territory on the daily chart, signalling persistent downside pressure. It also suggests scope for occasional corrective rebounds rather than a clear low marking selling exhaustion. The near-term outlook remains bearish as the retreat continues below key trend and volatility indicators. With spot prices beneath both the 100-day simple moving average (SMA) and the middle Bollinger band, rallies appear constrained within a broader corrective phase.

The middle Bollinger band, near $4,080, provides the first resistance level, ahead of the 100-day SMA at $4,205. Further above, the upper Bollinger band around $4,255 offers another potential ceiling. Immediate support lies at the lower Bollinger band of $3,900. A clear break below that level would open the way for further losses; if it holds, gold could consolidate within the existing band structure before attempting to test the cluster of resistance levels above.

(The technical analysis of this story was written with the help of an AI tool. Know more.)