Gold broke through $4100 and reached $4135 per ounce in the Asian session on Thursday. During the day, XAU/USD gained more than 3.5%, its strongest daily gain since mid-August. The push came from the US midterm elections: Democrats took both the Senate and the House of Representatives.
XAU/USD is the price of a troy ounce of gold in dollars. Midterm elections take place in the middle of a presidential term and renew the composition of Congress. The move hit several markets at once: gold, silver, the dollar and oil were repriced in a single session.
How strong was the surge?
The start was from around $3950. On Wednesday the metal crossed $4000, by night it was at $4065, and in Asia it reached $4135.
Related assets moved along with gold:
- About 5% - how much silver gained over the same stretch
- UGLD +5% - the rebound in Russian securities also played out
- PLZL +4% and SELG +3% - the rest of the sector's securities
Why did gold go up?
- Weak dollar. The DXY dollar index fell by about 0.5%, to 101.35, a four-week low. US bond yields also slipped.
- Political deadlock. The market is pricing in a split of power in Washington. With such a split, further inflating budget spending will be harder.
- Oil down. On the same backdrop, oil fell to a two-month low.
- Iran on the agenda. Top Senate Democrat Chuck Schumer said on Wednesday that he would push to end the war with Iran. To do so, he is ready to use control over government funding.
MUFG analysts note that the market reaction so far is weaker than the scale of the Democrats' victory.
What did the statistics show?
Macro data came out calm. They don't break the picture, but they keep the rate-hike theme on the table.
- 86k - growth in US private-sector employment in October according to ADP, the same as a month earlier
- 54.5 - ISM services business activity index versus 54.9 in September, still above 50
- 82.7% - probability of a Fed rate hike in December according to CME FedWatch
What's next?
The nearest point is the US employment report on Friday, November 6. FOMC members' speeches will add to this. It's convenient to keep the dates at hand in the economic calendar.
Gold levels are currently as follows:
- 75.77 - four-hour RSI, i.e. the overbought zone
- $4186 - the nearest reference level above
- $4124 and $4065 - reference levels below
Key point: gold is at a two-week high, but the indicator is already in overbought territory. Ahead of Friday's data, this is a reason to size your volume, not to add risk.
Were you in gold on this candle?
Almost 200 dollars per ounce in a day. How much you took from this depends on the volume you held in the move. The second question is the rulebook: the employment report comes out on Friday, and some prop programs cut volume before the release or even close trading a few minutes before the data comes out. Somewhere such trades are the basis of a strategy, somewhere a reason to disable the account. A filter by market and style shows this before Friday, not after.