US midterm elections impact on gold, silver prices in India: How Donald Trump's loss is affecting precious metals rates
US midterm elections' impact on gold and silver prices in India: Gold prices in India staged a sharp rebound on Wednesday after Democrats swept the US midterm elections. MCX Gold Futures (with December expiry) was trading 2.35% higher on Wednesday. Meanwhile, MCX Silver Futures (with December expiry) was up 3.85%.
The recent rebound in gold and silver prices came as the US dollar declined after Democrats scored victories in Republican strongholds across the country and changed at least seven Senate seats.
What is the impact of US midterm elections on gold, silver prices?
Gold prices are likely to find support as the US dollar declines, with investors evaluating the prospect of tighter AI regulation and its potential drag on economic growth.
With the US midterm election victory, Democrats now enjoy a stronghold in both the Senate and House, as the party scored wins in Republican strongholds for the first time in generations.
A weaker dollar would mean that dollar-denominated currency would become less expensive for buyers holding other currencies, and it would also support demand for the precious metal.
“The initial market reaction has been favourable for bullion, with a weaker US dollar and declining Treasury yields improving the appeal of non-yielding assets such as gold and silver. International spot gold advanced above $4,040 per ounce, while silver moved towards $52 per ounce,” explained Gaurav Garg, Head of Research at Lemonn.
While gold prices are seeing upside momentum after the US election announcement, investors await this week's US payrolls data for fresh signals on the Federal Reserve's rate outlook.
“However, the election outcome should be viewed as a short-term catalyst rather than the beginning of a sustained rally on its own,” noted Garg.
The impact of US midterm elections was further amplified in domestic gold prices. “For Indian investors, the impact is amplified by movements in the rupee, as a weaker domestic currency can increase imported bullion prices, while rupee appreciation may partially offset gains in international gold and silver,” Garg added.
Can we see fresh upside in gold and silver prices?
While gold is seeing immediate support, it is unlikely to see sharp upswings in the coming weeks as the US Federal Reserve is likely to remain hawkish due to concerns around sticky inflation.
“The fact that the Fed is likely to remain hawkish due to the inflationary backdrop means that the scope for further gains in gold prices is limited. Meanwhile, given that gold has increasingly become positively correlated with equities, continued weakness in tech stocks could also weigh on gold prices," Hamad Hussain, senior climate and commodities economist at Capital Economics, told Reuters.
US midterm elections
Democrats won both the US Senate and House of Representatives. Now they will take control of Congress for the rest of Donald Trump's presidency. Democrats have secured nearly 54 Senate seats and 225 House seats.
In a major poll of voters reported by the BBC, nearly 75% of respondents stated that the economy is “not so good or poor”, while 25% opined that the US economy is currently in an “excellent or good state.”