Gold News: Election Uncertainty and Fed Policy—Bearish Reversal or Bullish Breakout?

Gold Soars to Record High, Retreats as Dollar and Yields Rise

Gold touched a record high of $2,790.17 last Thursday, fueled by safe-haven demand amid looming U.S. election uncertainties and continued Middle Eastern tensions. By Friday’s close, however, gold pulled back to $2,736.45, marking a 0.39% weekly decline as surging U.S. Treasury yields and dollar strength added selling pressure. The stronger dollar weighed on gold, as higher yields made non-yielding assets like bullion less attractive in comparison.

Weak Non-Farm Payrolls Reinforce Rate Cut Expectations

Friday’s U.S. Non-Farm Payrolls report showed only 12,000 jobs added—its weakest gain since December 2020. The report, affected by hurricane disruptions and strikes, missed expectations and underscored market hopes for a Fed rate cut on November 7. Although weak jobs data raised rate cut expectations, dollar strength and higher yields ultimately limited gold’s upside. Nonetheless, a 25-basis-point Fed rate cut remains nearly fully priced in for next Wednesday’s meeting.

Weekly Technical Analysis Signals Possible Correction

Gold’s weekly technicals reveal a potentially bearish closing price reversal top, with a higher high and lower close for the week. This pattern suggests a possible short-term pullback, with traders eyeing $2,724.75 as key support. A decisive break below this level could validate the reversal, prompting a correction that might test $2,697.28. Further downside could see gold reaching the next significant support at $2,604.39, which, if broken, could shift the main trend to bearish.

Major Events Ahead: U.S. Election and Fed Decision in Focus

The coming week brings high-stakes events, with the U.S. presidential election on Tuesday and the Federal Reserve’s rate decision on Wednesday. With markets now pricing a 25-basis-point cut, the Fed’s decision could support gold prices if confirmed, as falling interest rates make gold more appealing. Meanwhile, uncertainty around the election outcome is stoking safe-haven demand for gold, especially as polls show a tight race.

Market Forecast: Bearish Bias with Volatility Expected

As gold holds around $2,724.75, traders are watching closely to see if this level holds. A break below could confirm the bearish reversal, potentially triggering a broader correction. Conversely, if support holds, gold may consolidate, with a potential for renewed gains depending on the Fed’s decision and election results.

In summary, while election risks and rate cut expectations could support gold’s longer-term outlook, near-term indicators call for caution. With volatility anticipated from Tuesday’s election and Wednesday’s Fed meeting, traders should prepare for potential swings, with critical levels in mind for well-timed entries and exits.