Gold prices (XAU/USD) face significant downward pressure in the European session this Wednesday, dropping to around $2,700—a low not seen in nearly three weeks. The shift stems from Republican nominee Donald Trump leading in the U.S. presidential race, which has sparked a robust rally in the U.S. Dollar (USD), prompting traders to sell off gold.
Market sentiment also reflects concerns about deficit spending and predictions of a less aggressive stance from the Federal Reserve (Fed) regarding rate cuts. This has pushed U.S. Treasury bond yields higher, further discouraging investors from seeking returns in non-yielding assets like gold. Additionally, a noticeable “risk-on” movement, marked by a rise in U.S. equity futures, indicates a preference for riskier assets over safe-havens, adding further pressure on gold.
Key Market Movers: The Unyielding Rise of the USD
The USD climbed to a four-month high following U.S. election exit polls, suggesting that former President Donald Trump’s vote count was leading. The tally now stands at 227 for Trump against 189 for Vice President Kamala Harris, with Trump also leading in key swing states, including Arizona, Georgia, Michigan, Pennsylvania, and Wisconsin.
Additionally, Republicans have gained control of the U.S. Senate, as confirmed by Fox News, with notable wins in Ohio, where Trump-endorsed nominee Bernie Moreno is projected to beat the incumbent Democratic senator. With Trump’s strong showing, speculation has grown around potential tariffs and increased federal spending, both of which could spur inflation and boost U.S. Treasury yields. The 10-year U.S. government bond yield surged nearly 3.5% intraday, hitting its highest level since July at 4.44%, adding to downward pressure on the gold price.
Geopolitical Factors Impacting Gold Prices
Despite persistent concerns over potential Iranian responses to Israel’s recent attacks on its territory, the traditional safe-haven appeal of gold has not gained enough traction to offset the downward trend. The risk-on sentiment and stronger USD continue to outweigh these geopolitical factors in terms of market impact.
Technical Analysis: Gold’s Key Support and Resistance Levels
On the technical front, gold prices may find immediate support near the $2,725–$2,720 range. A decline below this could result in further movement towards the $2,690 level, the lower end of a short-term ascending trend channel established in late July. A break below this level could intensify the recent corrective pullback, possibly driving XAU/USD towards the $2,675 area or even lower to the $2,657-$2,655 zone.
Conversely, if gold prices recover, they may face initial resistance near $2,748–$2,750. Overcoming this level could enable gold to target the ascending trend-channel resistance at $2,780–$2,785, with $2,800 representing a crucial turning point. Sustained movement above this mark could potentially reinstate the previous uptrend.
This analysis highlights key price movements and potential trends for gold investors, emphasizing recent political and economic factors. For regular insights and updates, visit Daily Gold Signal. For daily updates on the gold market, check the Daily Gold Update page.
