Investors Are Rushing To Gold As US Dollar Tanks

What happened

Gold rose sharply Wednesday after the U.S. dollar weakened following midterm elections in which Democrats won control of both chambers of Congress. Spot gold gained 3% to $4,046.74 per ounce by midday GMT, while U.S. December gold futures rose 2.9% to $4,054.60.

Confirmed

Global impact / market context

A weaker dollar can make gold cheaper for buyers using other currencies, supporting demand and potentially lifting miners’ revenue if higher prices persist. But gold pays no interest, so higher borrowing rates can make it less attractive and restrain further gains.

Analyst inference

The article links the rally to concern about the U.S. fiscal outlook after the election, while identifying upcoming payroll data and Federal Reserve rate expectations as counterweights. Traders put the chance of a December rate increase at about 82%.

Confirmed

What to watch

1. Friday’s U.S. nonfarm-payrolls report could shift expectations for Federal Reserve policy; stronger data may support higher rates and weigh on gold’s appeal. Confirmed
2. Watch whether the dollar remains weak and whether election-related concern about U.S. government finances persists, since both could help sustain overseas demand for dollar-priced gold. Analyst inference
3. Any change in the reported U.S.-Iran negotiating distance could alter geopolitical risk, another possible influence on demand for gold as a perceived safe store of value. Confirmed

Evidence

• gurufocus.com