Oil’s retreat offers Gold some respite as traders await key US economic data

Gold opens the week firmer, supported by easing Oil prices as US-Iran diplomatic efforts resume.
Gold's gains remain constrained by lingering inflation worries and expectations of a hawkish Fed.
With the RSI nearing oversold levels, the technical picture for XAU/USD continues to favour the bears.

Gold (XAU/USD) is recovering at the start of the week, drawing support from lower Oil prices as the US and Iran pursue diplomatic efforts. The uptick follows Friday's fall to a fresh yearly low of $3,870 and a 6.87% decline over October. Buying interest remains unconvincing, however, with the fundamental environment still casting doubt on the prospects for a lasting recovery.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

Iran’s Foreign Ministry spokesman Esmaeil Baghaei said on Monday, “Exchange of messages with the US continues,” and added that Deputy Foreign Minister Kazem Gharibabadi was in Doha to help advance the process. According to Iran, its proposal could allow the Strait of Hormuz to reopen within two days of an agreement, on condition that Washington lifts its naval blockade and fulfils Tehran’s demands. West Texas Intermediate (WTI) is trading below $100 a barrel, a decline of around 3% on the day.

At current levels, Gold is around 30% below the all-time high of near $5,600 reached in January. The metal has generally traded in the opposite direction to Oil since the US-Iran war broke out in late February. Higher energy costs have fuelled inflation, pushing central banks, especially the Federal Reserve (Fed), towards tighter monetary policy.

Although geopolitical uncertainty and inflation usually support Gold demand, expectations of higher interest rates are proving the stronger influence this time, weighing on the non-yielding metal. Nor has the AI-led sell-off in technology stocks provided support, even as it has weakened the US Dollar (USD) and Treasury yields. Traders have instead been selling Gold to fund margin calls and offset losses in other positions.

After earlier reaching a one-week low of 101.44, the US Dollar Index (DXY) is hovering around 101.70, a fall of 0.27% on the day. The index measures the Greenback against a basket of six major currencies. At the same time, the benchmark 10-year US Treasury yield is near a seven-week low at around 4.91%. That is well below its October peak of 5.36%, which was the highest reading since 2002.

Could US elections and economic data shape Gold's next move?

The US midterm elections on 3 November are the next focus, with the potential to move the US Dollar and consequently Gold. A packed economic calendar will also give traders fresh signals on the Fed's interest rate trajectory. The ISM Manufacturing Purchasing Managers Index (PMI) is scheduled for Monday, with JOLTS Job Openings following on Tuesday. Wednesday brings ADP Employment Change and the ISM Services PMI, before the Nonfarm Payrolls (NFP) report on Friday.

Following a 25-basis-point (bps) increase in September, the Fed chose to wait in October as it continued its battle against inflation. Policymakers voted 10-2 to hold interest rates at 3.75%-4.00%. According to CME FedWatch, traders assign a 72% probability to a rate hike in December.

US midterm elections: key questions answered

What do voters choose in the US midterm elections?

Held at the midpoint of a president's four-year term, the US midterms are federal elections in which voters elect all 435 members of the House of Representatives and roughly one-third of the Senate. In many states, voters also choose governors and other officials at state and local levels.

On what date will the 2026 midterm elections take place?

Voters go to the polls on Tuesday, 3 November 2026. Under federal law, Election Day falls on the Tuesday following the first Monday in November. Many states have already begun early voting and voting by post.

Why does the outcome of the US midterms matter?

Control of both chambers of Congress during the final two years of President Donald Trump's term depends on these elections. Whichever party holds the majority determines the legislative agenda and selects committee leaders. In the Senate, the majority also controls the confirmation of judges and senior officials.

Will voters elect a president in the 2026 midterms?

No. Presidential elections take place at four-year intervals, with the next scheduled for November 2028. Midterm elections are frequently viewed as a verdict on the incumbent president's party, which has historically tended to lose seats in the House.

What could the 2026 midterm results mean for the US dollar?

A limited, temporary response in the US Dollar, rather than a sustained trend, is what most analysts anticipate. Markets broadly regard a divided Congress as the most likely outcome and have already priced it in to some extent. The reaction in Treasury yields may be more pronounced. Results that increase expectations of fiscal stimulus generally push both yields and the US Dollar higher; a legislative impasse that curbs fresh spending can weigh on both. Disputes over funding or the debt ceiling can also give the Dollar a brief safe-haven boost. Over a six-to-twelve-month horizon, however, economic growth and Federal Reserve policy carry more weight than the election result.

What is the historical pattern for stocks around midterms?

Historically, US equities have tended to struggle ahead of midterm elections and strengthen afterwards. Looking at the record since 1950, the S&P 500 has stood higher 12 months after every midterm election: 19 out of 19 instances, delivering an average gain of about 15%. Analysts attribute this pattern to the easing of uncertainty after the results. Past performance does not guarantee future returns, and some strategists caution that elevated valuations in 2026 could challenge that run.

Why might markets favour a divided Congress?

A divided government has often found favour with markets, as legislative gridlock reduces the likelihood of far-reaching tax, spending and regulatory changes. With a Republican president in office, the S&P 500 has historically performed well in the years after midterms that left control of Congress split. Funding deadlines, disputes over the debt ceiling and congressional investigations remain risks, potentially increasing short-term volatility.