Gold prices extended their rally on Thursday, climbing to a more than two-week high as a weaker US dollar and falling oil prices boosted demand for the precious metal.
Spot gold rose 1.6% to $4,125.82 an ounce, taking it around its highest level since October 22.
The rally followed a 3.4% jump on Wednesday , which was the metal’s biggest single-day gain since August 19.
The recovery comes after several weeks of weakness, with investors finding renewed reasons to return to bullion following the Democratic Party’s victory in the US midterm elections.
Silver also advanced, rising to $52.84 an ounce, with a gain of over 1%.
Weaker dollar pushes gold higher
The biggest support for gold came from a decline in the US dollar and Treasury yields following the midterm election results on Wednesday.
The Democratic Party secured control of both the House of Representatives and the Senate, raising expectations of legislative gridlock that could restrict President Donald Trump’s fiscal agenda and limit additional government spending.
The US dollar and Treasury yields remained near multi-week lows on Thursday, helping gold extend gains.
A weaker dollar makes gold cheaper for international buyers, potentially supporting demand.
Meanwhile, lower bond yields reduce the opportunity cost of holding gold, which does not generate interest income.
Ole Hansen, head of commodity strategy at Saxo Bank, said precious metals had emerged as major winners following the elections.
“The powerful combination of falling energy prices, easing inflation and interest rate concerns, and declining Treasury yields and the dollar has forced recently established speculative shorts to cover,” Hansen was quoted as saying by Reuters.
Falling oil prices ease inflation concerns
Oil prices have also played an important role in the recovery.
Brent crude plunged more than 8% on Wednesday and remained below $100 a barrel on Thursday despite rising slightly.
The decline followed Democratic victories in the midterms and renewed hopes that political pressure could encourage the Trump administration to pursue a diplomatic resolution to the Iran conflict.
Higher energy prices had previously raised concerns about persistent inflation and prolonged restrictive monetary policy.
The recent decline in crude has eased some of those concerns, providing another source of support for gold.
Bank of England raises interest rates
In the UK, the Bank of England raised its benchmark interest rate by 0.25 percentage points to 4% on Thursday, marking its first increase in more than three years.
The central bank warned that UK inflation could reach around 5% by mid-2027 as higher energy costs from the Middle East conflict feed into the economy.
The rate hike did not affect the bullion much as it held gains despite the announcement.
Investors are now looking toward Friday’s US nonfarm payrolls report for fresh clues about the labor market and the Federal Reserve’s policy direction.
Stronger employment figures could reinforce expectations of another Fed rate increase in December, potentially limiting further gains in gold.
Softer data could ease concerns about monetary tightening and provide additional support for bullion.
OCBC strategists remain cautiously optimistic that gold may be finding its footing, but said further gains would likely require some moderation in Fed tightening expectations and a continued recovery in investment demand.
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