Gold Price Forecast: Gold Surges Past $4,100 on US Midterms as Market Focuses on October Non-Farm Payrolls

TradingKey - As of the Asian session on Thursday (November 5), gold prices (XAUUSD) extended yesterday's strong rebound, standing above $4,100 intraday today and reaching a high of $4,138.06, up more than $70 on the day. Previously, gold surged 3.31% on Wednesday, marking its largest single-day gain since August and reaching an intraday high of $4,070.62, successfully reclaiming the $4,000 mark. Following the announcement of the U.S. midterm election results, a notable pullback in the U.S. dollar and Treasury yields became the main driver behind gold's rebound.

US Midterm Elections Push Dollar Lower as Gold Regains Upward Momentum

From a fundamental perspective, the current rebound in gold prices was primarily driven by the results of the US midterm elections and shifts in expectations regarding Federal Reserve monetary policy.

Results of the US midterm elections showed that the Democratic Party won control of both the Senate and the House of Representatives in Congress. Markets began to reassess changes in future US fiscal spending, tax, and regulatory policies. As Congress and the White House may face greater coordination challenges on major policy issues, investors adjusted their expectations for future fiscal expansion and economic growth prospects.

Following the release of the election results, US Treasury prices rose while the US Dollar Index dropped significantly. The 10-year US Treasury yield briefly fell to around 4.89% on Wednesday, touching a recent low, and the dollar slipped to a more than one-month low. A weaker dollar reduced the cost for holders of other currencies to buy gold, while declining Treasury yields lowered the opportunity cost of holding non-yielding bullion, providing support for the gold price rebound.

Meanwhile, a pullback in international oil prices also improved gold's short-term fundamentals. As markets reassessed the situation in the Middle East and energy supply prospects, oil prices fell significantly from previous highs. Lower energy prices helped ease US inflation expectations, thereby mitigating market fears of further Federal Reserve interest rate hikes.

However, expectations of a Fed rate hike in December remain elevated. According to the CME FedWatch Tool, the market estimates an 81.8% probability of another Fed rate hike in December. In addition, US ADP private-sector employment increased by 86,000 in October, exceeding market expectations of around 75,000 and indicating that the labor market has not shown clear signs of deterioration.

Looking ahead, the market will focus on the US October non-farm payrolls report to be released on Friday (November 6). If job gains fall short of expectations and wage growth slows, it could further pull down Treasury yields, helping gold extend its rebound; conversely, if employment data remains robust, market expectations for rate hikes may stay elevated, thereby capping gains in gold prices.

Gold Price Technical Analysis

Gold price daily chart, Source: TradingView

Looking at the daily chart, gold had previously fallen to around $3,870 on October 30 before gradually stabilizing. On Wednesday, gold surged rapidly from around $3,930 to $4,070, reclaiming the key $4,000 level. Short-term bearish momentum has weakened noticeably, and today it rose back above $4,100, significantly boosting market bullish confidence.

Currently, gold has broken through the $4,100 resistance level. If today's closing price holds firmly above $4,100, the short-term bullish structure for gold will improve significantly, and prices may further test the resistance zone of $4,200-$4,230 to the upside. A break and hold above $4,230 would open up upside room toward the $4,300-$4,320 range.

On the downside, the primary support level to watch below is $4,100. If this level is lost, gold prices may test support near $4,080, and further down, they could test the key $4,000 mark.