Can Gold Extend Gains Near $3,950 as Traders Prepare for US Midterm Election?

Gold gains 1.75% on the day, climbing towards $3,950 in early Asian trading on Tuesday.
Following a session without a breakthrough, Iran says negotiations to end the war are continuing.
Gold could draw support from safe-haven demand amid uncertainty over the US midterm elections.

Gold’s rebound gathers pace as lower oil prices ease inflation concerns, taking XAU/USD to around $3,950 in early Asian trading on Tuesday. Attention now turns to the US midterm elections later this week, which traders will watch closely.

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

Efforts by the US and Iran to end their eight-month conflict remain under way, Tehran said on Monday. According to Reuters, several days of talks involving Iranian officials and Qatari mediators produced revised proposals, but no major breakthrough.

The proposal Iran put forward in September to end the war remains central to the negotiations, according to Iran's Foreign Ministry spokesperson Esmaeil Baghaei. At the same time, he confirmed comments attributed to Foreign Minister Abbas Araqchi on Saturday indicating that the proposal could be shortened.

Peter Grant, vice president and senior metals strategist at Zaner Metals, said: “Weaker oil prices have provided some relief … in terms of reducing inflation concerns. But the market is still expecting a December rate hike from the Fed, although those odds have lessened a little bit over the last couple of trading sessions,”

Inflation and deficit concerns could return to the centre of the broader market narrative with Tuesday’s US midterm elections. Such a shift could lend near-term support to safe-haven assets such as Gold. Opinion polls favour a Democratic victory in the House, although the outcome of the contest for a Senate majority is less certain.

According to the CME FedWatch Tool, the probability of a US rate increase in December priced into markets has eased to nearly 73%, compared with 80% a week earlier.

Can support for Gold counter oil headwinds as regional risks linger?

HSBC analysts see support for Gold, noting that “a stable US Dollar should help temper risks to gold,” and that the metal “remains well supported by diversification flows from central bank purchases, as well as geopolitical and fiscal uncertainty.” Oil presents a different picture. The bank says “we expect oil prices to remain volatile as they respond to changes in the news flow,” highlighting the energy complex as an ongoing source of uncertainty.

Turning to equities, HSBC says “South Africa benefits from a bullish outlook for gold, but geopolitical uncertainty remains a drag on the region,” and notes that “elevated oil prices remain headwinds for the region.” Its approach to EM Asia has also become more selective despite the region’s structural advantages. The bank says EM Asia “is resilient given its strategic role in the global AI supply chain, but we have become more selective,” signalling a more discerning investment stance.

On the sector outlook, HSBC points to favourable demand and pricing trends, saying “the sector is benefitting from multiple positive trends that are lifting demand and prices,” and adding that “valuations are the lowest among all sectors, with many large companies reporting strong cash flows and relatively high dividends.” These supportive fundamentals nevertheless face a continuing geopolitical risk overlay. The bank cautions that “regional conflicts are likely to continue for the rest of the year, with damaged infrastructure delaying a swift return to normality,” underscoring the persistence of those risks.

Technical Analysis: Can Gold shake off bearish pressure below the 100-day SMA?

Bearish pressure remains evident on the XAU/USD daily chart as the price consolidates close to recent lows. Trading below both the 20-period Bollinger Bands simple moving average (SMA) and the 100-day SMA suggests that upside remains constrained. At 36.88, the Relative Strength Index (14) sits just above oversold territory, pointing to weak downside momentum rather than outright exhaustion. Further declines therefore remain possible unless the price regains these overhead averages.

Any recovery would first encounter resistance near $4,090 at the Bollinger midline. Beyond that, the 100-day SMA at $4,210 and the upper Bollinger band around $4,255 mark a broader supply zone if the rebound gains momentum. Immediate support lies at $3,920, where the lower Bollinger band is positioned. A decisive breach would open the way to fresh lows; if that level holds, XAU/USD would remain in a bearish range below the cluster of moving-average resistance.

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

Common questions about Gold

What makes Gold an investment choice?

Widely used as both a store of value and a medium of exchange, Gold has held an important place throughout human history. Today, its appeal extends beyond its lustre and use in jewellery: the metal is commonly regarded as a safe-haven asset, or a sound investment during periods of turmoil. Because it is not dependent on any particular issuer or government, Gold is also widely considered a hedge against inflation and currency depreciation.

Which buyers hold the largest Gold reserves?

The largest holders of Gold are central banks. To underpin their currencies during unsettled periods, they typically diversify their reserves and purchase Gold, reinforcing perceptions of economic and currency strength. Substantial Gold holdings can bolster confidence in a country’s solvency. World Gold Council data show that central banks increased their reserves by 1,136 tonnes of Gold, valued at around $70 billion, in 2022. That was the largest annual purchase since records began. Emerging-economy central banks, including those of China, India and Turkey, are rapidly expanding their Gold reserves.

How does Gold move in relation to other assets?

Both the US Dollar and US Treasuries are major reserve and safe-haven assets, and Gold has an inverse correlation with them. A decline in the Dollar generally coincides with a rise in Gold, allowing investors and central banks to diversify their holdings during uncertain periods. Risk assets also tend to move in the opposite direction to Gold. Stock-market gains usually weigh on the metal’s price, whereas selling in riskier markets generally supports it.

Which factors influence Gold prices?

Several factors can drive changes in Gold prices. Its safe-haven appeal means geopolitical turmoil or concerns over a severe recession can trigger a rapid increase. Since Gold offers no yield, lower interest rates generally support it, while a higher cost of borrowing usually puts pressure on the metal. Even so, most price movements hinge on the US Dollar (USD), as Gold is quoted in dollars (XAU/USD). Dollar strength tends to restrain Gold prices, while a weaker Dollar is likely to lift them.