Gold jumps to a two-week high as the dollar slips after US midterms

Gold is having a very good week. On Thursday the metal rose by almost 2% to its highest level in two weeks, helped by a softer dollar and falling US bond yields.

What happened?

Spot gold gained 1.9% to $4,134.83 an ounce by 03:16 GMT, its best level since October 22. US December futures rose 1.8% to $4,144.20.

It follows a big jump on Wednesday, when gold surged about 3.4%. That was its largest daily gain since August 19.

Other precious metals moved up too. Silver rose 1.7% to $53.12, platinum gained 2.1% to $1,527.65, and palladium added 2.6% to $1,030.14.

Why now?

The trigger was the Democrats' wide win in the US midterm elections, which we reported earlier this week. It removed a major source of uncertainty and lifted global stock markets.

The dollar slipped a little as a result. That matters because gold is priced in dollars: a weaker dollar makes it cheaper for people holding other currencies, which lifts demand.

The yield on 10-year US Treasury bonds (the US government's borrowing cost) fell 6 basis points overnight and one more in early Tokyo trade, to 4.87%. Gold pays no interest, so lower yields make it more attractive.

Lynn Tran, a market analyst at XS.com, said the weaker dollar and lower yields helped gold recover and climb back above $4,000. She said staying above that level is key, and that it could open the way to $4,200 and then $4,400.

What's next?

All eyes are on Friday's US non-farm payrolls report (the monthly jobs figures). It could give fresh clues about what the Federal Reserve will do with interest rates.

There is a catch. According to CME's FedWatch tool, traders currently see an 82% chance of a US rate hike in December. Higher rates usually hurt gold, because they raise the cost of holding an asset that pays no income.

Citi, meanwhile, set a target of $4,500 an ounce for the next zero to three months. The bank sees room for more gains if the Strait of Hormuz reopens and the conflict between Yemen and Saudi Arabia eases before the end of the year, which is the scenario it expects.