Gold climbs above $4,000 as US political uncertainty pressures the dollar

Gold (XAU/USD) rose above the $4,000 psychological threshold as European markets opened on Wednesday, driven by political uncertainty following the recent US midterm elections. Democratic gains in both the House and Senate have raised expectations of legislative gridlock, which could curb government spending and weigh on the US dollar.

The prospect of tighter fiscal policy and potential setbacks for technology stocks have increased demand for safe-haven assets, supporting gold prices. However, expectations of a further Federal Reserve rate increase remain strong. The CME Group's FedWatch Tool shows traders assigning roughly an 80% probability that the Fed will raise rates at its December meeting, a view reinforced by the Labor Department’s Job Openings and Labor Turnover Survey, which reported 7.523 million job openings in September.

"The United States has no immediate plans to strike Iran," President Donald Trump told the Financial Times on Tuesday.

Geopolitical tensions continue to influence markets. A senior Iranian official indicated that the Strait of Hormuz would reopen only if sanctions are lifted and the US naval blockade ends, while Iran’s Islamic Revolutionary Guard Corps reported that four tankers were destroyed after hitting mines near the strait. These developments sustain a risk premium that could affect oil prices and, indirectly, inflation expectations.

Traders are awaiting Wednesday’s US economic releases, including the ADP employment report and the ISM Services PMI, and will watch Friday’s Nonfarm Payrolls for further clues on dollar demand. Technical analysis shows gold still below the 100-period simple moving average and facing resistance near $3,970, with a break above that level needed to test higher Fibonacci retracement points.

The market remains cautious, and analysts suggest waiting for a sustained move beyond the $3,970 barrier before confirming a bottom and considering a broader recovery.