Gold futures posted their first climb in four sessions on Wednesday, buoyed by a weaker dollar in the wake of midterm elections that will leave the U.S. with a divided Congress.
I view the results as supportive of higher gold prices because the only thing that comes out of a gridlocked Congress is higher spending. This means even higher deficits and an even larger federal debt burden. I think with interest rates rising, the cost of servicing the national debt will reach levels that are unmanageable without significant dollar devaluation. I think smart money realizes this and is already betting against the greenback going forward.
December gold was up $2.40, or 0.2%, to settle at $1,228.70 an ounce on Comex. December silver added 6.9 cents, or 0.5%, to $14.569 an ounce.
Treasurys climbed, reducing yields, and the dollar weakened post election, which saw Democrats take control of the House and Republicans on track to strengthen their grip on the Senate. A divided Congress is seen as making it unlikely President Donald Trump will be able to pursue further tax cuts, easing concerns about the deficit. A weaker dollar is seen as a benefit for gold, as it makes dollar-priced commodities cheaper to buyers using other currencies.
In other metals trade, January platinum rose 0.8% to $878.80 an ounce, while December palladium added 2.3% to $1,120.70 an ounce.