Gold Spikes on Wednesday

Gold prices are sharply higher today on the back of the USD weakness we’ve seen from the US midterms outcome. The so-called ‘Blue Tsunami’ (Democrats have control of both houses) has hit USD today with stocks and commodities rallying accordingly. Gold futures are up around 3% as of writing and the rebound here could prove a turning point for the market if the USD reversal gathers traction. The prospect of fiscal and political deadlock in the US now blurs the outlook for the US Dollar with further USD weakness likely near-term, supporting gold.

US Jobs Data on Friday

However, Friday’s US jobs report will also be pivotal and any upside surprise could cap the rally in gold, helping refocus investors’ minds on a December Fed hike. Market pricing for a move by year end is around 805 currently, showing plenty of room to increase if we see strong data. On the other hand, if we get a downside surprise on Friday, this could amplify the selling we’re seeing in USD, driving gold higher, as traders scale back December rate hike expectations. A combination of the Democrat win in the midterms and a downside surprise in the NFP on Friday would be heavily bearish for USD and firmly bullish for gold.

Technical Views

Gold

The reversal off YTD lows has seen price breaking back above the 3,940.24 level with price now testing the bear trend line from August highs. Above here, 4,085.75 is the next resistance to note. While the 3,940.24 level holds, focus is on a recovery higher with 4,198.75 the higher bull target to monitor.