Gold rallies as Oil tumbles: A new leading correlation?

FXStreet · Valeria Bednarik · 2026-11-05 17:24 UTC

Spot Gold (XAU/USD) made quite an impressive comeback in the last couple of days, recovering from a yearly low of $3,870 to the $4,140 region. The advance seems more meaningful given the metal's preceding bearish trend, which has not fully reversed.Gold bullish return explainedMultiple factors are playing in favor of the precious metal, but at the end of the day, they all share the same root.United States (US) President Donald Trump has faced a massive rejection of his foreign policies in the mid-term elections. While the final results may take a couple more weeks, Democrats have seized control of Congress, gaining 7 seats in the Senate to a total of 54 representatives, and 30 seats in the House to clinch a majority of 240.Americans got fed up with cost-of-living issues, all coming from President Trump’s obsession with ‘making America great again’. His plan to take control of global Oil sources and make the USA into the world’s largest Oil supplier failed the day he thought he could do in Iran what he did in Venezuela. It’s one thing to invade a developing country and another to mess around with the Middle East Islamic Republic. Soaring Oil prices turned into hotter-than-tolerable inflation, and hence, the mid-term elections outcome.And while the new Congress won’t be in place until January, expectations of a political gridlock in Washington weighed the US Dollar (USD) lower. The Dollar Index (DXY) fell to a one-month low, igniting demand for high-yielding assets.Additionally, Oil prices are sharply down amid hopes the US and Iran will reach a diplomatic solution to the Middle East war. US government bond yields have also retreated, with the 10-year Treasury note currently yielding around 4.9%, reflecting hopes the worst of inflation is behind us.Gold is benefiting from this picture and recovering its safe-haven status: the election’s outcome also led to a sharp sell-off on Wall Street, mostly in tech shares, which were also hit by the Democratic victory.One more factor is the Fed's rate outlook: without expectations of continued inflationary pressures, the Federal Reserve (Fed) won’t need to hike rates. Indeed, market players still price in a December 25 basis points (bps) rate hike, but the odds have fallen from roughly 80% before the elections to 74% currently, according to the CME FedWatch Tool. Odds for additional rate hikes in 2027 have declined below 20%, according to the same tool.XAU/USD Technical Outlook The XAU/USD pair retreated from an intraday high of $4,147 and hovers around $4,110, still retaining a good chunk of its intraday gains. More relevantly, the pair develops above a daily descending trend line coming from $4,510, the September monthly high, broken this Wednesday. If the $4,060 price zone remains a firm downward barrier in the upcoming days, additional Gold gains will be on the table. Technical readings in the daily chart show limited upward momentum and a tough path ahead for bulls: technical indicators have recovered from near oversold territory, but struggle to extend gains above their midlines. Price is currently above a mildly bearish 20-day Simple Moving Average (SMA) in the $4,070 zone, while a flat 100-day SMA holds just above $4,200. Moving averages losing their downward slopes also hint at higher highs ahead.The intraday peak at $4,147 is the initial barrier for buyers: if XAU/USD surpasses it, sellers will become disappointed and are likely to unwind some positions, triggering even more gains. The next relevant resistance area is $4,220, while gains beyond that expose the $4,300 threshold.

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