Uncertainty could result in selling pressure for gold

Gold prices could face renewed selling pressure amid uncertainty after US Democrats won control of both the House of Representatives and the Senate, potentially prompting fears of further military escalation in the Middle East, says YLG Bullion & Futures.

Warut Rungkham, head of analysis at YLG, said investors are concerned that an election defeat for President Donald Trump could prompt an escalation in military action in the Middle East, potentially invoking emergency powers to maintain his grip on power.

Such concerns, particularly amid heightened geopolitical tensions and speculation about the possible use of nuclear weapons, could trigger panic selling across financial markets, putting gold and other assets under renewed pressure, noted the trader.

If a major military escalation or nuclear attack occurs, severe market disruption could prompt investors to liquidate holdings across multiple asset classes, causing prices to plunge despite gold's traditional safe-haven status, he said.

However, a Democratic victory in both chambers of Congress could also create an opportunity to constrain the administration's military actions and help ease tensions in the Middle East, said Mr Warut.

A de-escalation could push oil prices and inflation lower, reducing pressure on interest rates and creating more favourable conditions for gold to recover, noted YLG.

Gold prices remain in a sideways-downward trend, with the recent rebound proving limited, he said.

Gold fell to around US$3,870 an ounce, while domestic prices dipped to 62,200 baht per baht-weight.

"If geopolitical developments and the US election outcome create further headwinds, prices could slide towards key support at $3,800 an ounce," said Mr Warut.

Any short-term recovery is expected to face resistance at around $4,200 an ounce. Failure to break through this level could send prices back into consolidation or another downward correction, noted YLG.

Despite short-term volatility, continued gold purchases by central banks in the third quarter, as reported by the World Gold Council, remain a longer-term source of support for the precious metal, he said.

The council reported central banks added a net 321 tonnes of gold to their reserves in the third quarter this year, up 42% year-on-year, marking their fastest pace of buying since late 2024.

Year-to-date purchases totalled 675 tonnes, 6% higher than last year's level, with portfolio diversification and risk management remaining the primary demand drivers, noted the council.