Spot gold and silver prices jumped in early U.S. trading Wednesday after Democratic victories in the midterm elections pushed the dollar and Treasury yields lower, reviving demand for precious metals. Spot gold traded near $4,041.30 an ounce, up $111.90 or 2.85%, while silver reached about $51.910, up $2.237 or 4.50%.
Gold climbed back above $4,000 following its sharp October correction, while silver staged an even stronger recovery. Lower yields and improving sentiment across precious metals encouraged renewed buying after the recent market weakness.
Democrats secured control of both the House of Representatives and Senate, gaining at least seven Senate seats and 18 House seats. Those victories included states that supported President Donald Trump in the 2024 presidential election.
The results reduced the administration’s ability to enact new fiscal, tax and regulatory policies without congressional compromise. Markets also considered whether legislative gridlock and closer scrutiny of federal spending could restrain fiscal expansion and future Treasury borrowing.
U.S. government bonds rallied as investors assessed the new political balance, while the dollar fell to its lowest level in about a month before recovering some losses. The benchmark 10 year Treasury yield declined roughly 2.1 basis points to 4.9291%, while the two year yield slipped to 4.6017%.
Lower yields and a weaker dollar created a more favorable environment for bullion. Kitco Research reported that gold prices rose an average of 14% during the 12 months following the previous 13 midterm elections.
The election also created competing considerations for financial markets. A Democratic Congress could slow proposed spending and tax measures, but additional scrutiny of artificial intelligence investment, corporate regulation and technology competition could affect equity valuations and business investment.
Recent economic reports continued to show resilient activity despite elevated borrowing costs. September job openings increased to 7.523 million from an upwardly revised 7.190 million in August, beating expectations near 7.15 million.
September factory orders rose 1.8%, exceeding forecasts for a 1.2% increase, while the October Institute for Supply Management manufacturing index advanced to 55.5 from 54.5. Those readings reinforced evidence of continued industrial expansion and firm labor demand.
The Federal Reserve left its benchmark interest rate unchanged at 3.75% to 4.00% last week, although two policymakers favored an immediate increase of 25 basis points. Third quarter gross domestic product grew at a 3.4% annualized pace, while September core personal consumption expenditures inflation stood at 3.1% annually.
Interest rate futures assigned a probability near 80% to another increase at the Fed’s Dec. 8 and 9 meeting. Investors are weighing persistent inflation and resilient employment against the possibility that divided government could produce a less expansionary fiscal outlook.
The October ADP private sector employment report showed an increase of 86,000 jobs, above expectations near 75,000. Upcoming services, jobless claims, productivity and employment reports could influence expectations for the Fed’s December decision and the direction of Treasury yields.
Tensions involving the Strait of Hormuz and relations between the U.S. and Iran remained another source of uncertainty. Qatar intensified efforts to revive negotiations, but disputes continued over sanctions relief, nuclear activity, the naval blockade of Iranian ports and commercial shipping through the waterway.
Crude prices declined despite an American Petroleum Institute estimate showing a 5.27 million barrel draw in U.S. commercial crude inventories for the week ended Oct. 30. Brent crude traded near $102.95 a barrel, while WTI stood around $95.25.
U.S. stock index futures initially fell sharply before recovering as investors reconsidered the consequences for fiscal policy and regulation. Nasdaq 100 futures dropped as much as 2.4%, while S&P 500 futures declined as much as 1.4% before reversing their losses.
Gold bulls are targeting a sustained move above $3,975.31 and the next published upside objective at $4,068.17. Silver bulls are seeking to hold above $51.103 and challenge the next published target at $52.849, while support is identified at $51.103 and $48.787.