Spot gold held onto strong intraday gains in early European trading on Wednesday (November 4), nearing its weekly high and remaining firmly above the psychological level of $4,000 per ounce, as the dollar weakened across the board. The Democratic victory in both the House and Senate increased the likelihood of a deadlock in Washington. Furthermore, heightened political uncertainty drove investors to safe-haven assets, putting downward pressure on US Treasury yields, which in turn weighed on the dollar and supported precious metals.

Election and the Dollar: Expectations of a political gridlock rise, causing the dollar to fall to its lowest level since late September.

The Democratic victory in both houses of Congress supported gold through two channels. First, the expectation of a political gridlock—a divided government means major legislation is unlikely to proceed, policy continuity decreases, and uncertainty increases. Second, safe-haven flows—political uncertainty drives investors to safe-haven assets, causing US Treasury yields to fall and the dollar to its lowest level since the end of September. For gold, these two channels work together: a weaker dollar directly boosts dollar-denominated gold, while lower yields reduce the opportunity cost of holding non-yielding assets.

Interest rate hike expectations: JOLTS is strong, with a probability of about 80% for a December rate hike limiting upside.

However, hawkish Fed expectations failed to help gold extend its intraday gains. According to the CME FedWatch tool, traders are currently pricing in a near 80% probability of another Fed rate hike at its next policy meeting in December. This bet was boosted by Tuesday's JOLTS report – September hiring remained relatively stable, with job openings rising to 7.523 million, up from an upwardly revised 7.19 million in August. Coupled with resilient economic growth and persistent price pressures, bets on an imminent Fed rate hike have solidified, keeping non-yielding gold capped below the $3,970 resistance zone. This combination means that a weaker dollar due to the election provides upward momentum for gold, but rate hike expectations act as a ceiling, creating a tug-of-war between the two.

Geopolitical risks: The Strait of Hormuz and attacks on oil tankers; risk premiums remain.

Despite ongoing diplomatic efforts to end the eight-month-long US-Iran conflict, geopolitical risk premiums continue to play a role. In the latest developments, Trump stated on Tuesday that the US has no immediate plans to strike Iran, although Israeli Prime Minister Netanyahu hinted at a possible attack later this week. Meanwhile, a senior Iranian official stated that the Strait of Hormuz will only reopen after sanctions waivers and the US naval blockade end. Furthermore, the Iranian Revolutionary Guard claimed that four oil tankers were destroyed after striking mines south of the Strait of Hormuz. This exacerbates concerns about oil supply risks and inflationary pressures stemming from energy price volatility, thereby supporting expectations of further policy tightening—the support for gold from geopolitical risks is indirect: it reinforces interest rate hike expectations through oil prices and inflation expectations, rather than directly driving safe-haven buying.

Data Focus: ADP and ISM Services PMIs to be released today, non-farm payrolls to be released on Friday.

Traders are now focused on Wednesday's US economic data – the ADP private sector employment report and the ISM services PMI. Additionally, a steady stream of geopolitical news could provide some momentum for gold. The focus remains on Friday's monthly non-farm payroll report, which will influence dollar demand and determine the near-term trajectory of precious metals. Given these fundamental factors, it would be prudent to wait for strong follow-through buying before confirming that spot gold has bottomed out and is poised for a correction from its lowest level since September 2025, reached last Friday.

in conclusion

Gold held above its weekly high and remained firmly above $4,000, primarily driven by the US election results, which dragged the dollar down to its lowest level since late September. Democratic victories in both houses of Congress increased expectations of a Washington gridlock, political uncertainty fueled safe-haven inflows, and lowered US Treasury yields, putting pressure on the dollar. However, hawkish rate hike expectations acted as a ceiling: JOLTS job openings rose to 7.523 million, with a December rate hike probability of approximately 80%, keeping gold prices below the $3,970 resistance level. Geopolitical risks remain, with the attack on oil tankers in the Strait of Hormuz and the conditions for Iran to reopen the strait indirectly supporting rate hike expectations through oil prices and inflation expectations, rather than directly driving safe-haven buying. Short-term direction depends on the repricing of rate hike expectations by the ADP and ISM services PMIs, Friday's non-farm payroll data, and the persistence of the dollar's weakness after the election. A wait-and-see approach, awaiting strong follow-up buying, is prudent before confirming a bottom. (Spot gold daily chart, source: EasyTrade) At 15:44 Beijing time, spot gold was trading at $4025.75 per ounce.