Although vote counting in the midterm elections has not yet been completed, the market has fully priced in Democratic control of both the Senate and the House of Representatives, with the Republican Party suffering a crushing defeat at the polls. Trump stated that "the election loss was indeed largely caused by the conflict with Iran."
Because the midterm elections pushed international oil prices higher and increased the consumption burden on ordinary people, voters and districts that strongly supported Trump in 2024 have shifted in large numbers toward the Democratic camp. According to media reports, the Democratic Party has recaptured at least seven Senate seats previously held by Republicans, including long-solid states and districts such as Texas, Kansas, South Carolina, Iowa, North Carolina, Ohio, and Maine.
As of now, Democrats may hold 51 to 53 seats in the Senate, giving them a majority, and have won 224 seats in the House, already surpassing the halfway mark. The Democratic Party has achieved full control of Congress, which the media has dubbed a "blue wave." Financial markets have shown dramatic synchronized swings.
Gold prices surged above $4,100 per ounce, while West Texas Intermediate (WTI) crude oil futures fell below $90 per barrel. The latest reading on the 10-year U.S. Treasury yield is 4.849%, a significant decline from 5.368% in early October. Gold rising while the U.S. dollar index falls means international markets are hedging against the risk of a possible U.S. recession. Silver, platinum, and palladium also rose in tandem, further confirming a broad rush into precious metals.
Figure 1, U.S. macroeconomic data - ATFX
The loss of congressional control by Trump's camp means that over the next two years, any aggressive fiscal expansion policy proposed by Trump may fail to pass a congressional vote, resulting in legislative gridlock. Over the next two years, the likelihood of another "government shutdown" due to insufficient budget funding is extremely high. Although the U.S. currently has an inflation rate of 3.7% and an unemployment rate of 4.2%, with strong consumer demand and a solid job market, as Trump's expansion policies are blocked, the macroeconomic outlook may reverse in the future.
The decline in crude oil prices is related to the midterm elections, but the more important driver is the trilateral talks to be held next week. According to media reports, the United States is preparing to hold working-level trilateral talks with Ukraine and Russia in Abu Dhabi on November 10-11. The talks will be led by U.S. special envoy Steve Witkoff and Jared Kushner, after Witkoff had previously met separately with Zelensky and Putin. The U.S.-Russia-Ukraine trilateral talks have refocused market attention on the Russia-Ukraine battlefield, which has lasted more than four years. If the trilateral talks achieve substantive results, Russian oil exports restricted by sanctions could fill the gap caused by Middle East issues.
Figure 2, Gold daily chart - ATFX
On the hourly level, gold's upward momentum is sufficient. A multi-indicator matrix shows 11 bullish signals, 2 bearish signals, and 1 neutral signal, with most indicators supporting gold remaining strong during the day. The MACD histogram is above the zero line and continuously expanding, indicating a relatively strong bullish trend; the KDJ and RSI indicators are in overbought territory, creating pressure for a technical pullback. In the early European session, the hourly candlestick showed signs of closing lower, currently judged to be a pullback. If the KDJ and RSI indicators can quickly move out of overbought territory, a new round of gains may begin after bottoming out.
ATFX Risk Warning, Disclaimer, and Special Statement: Markets carry risk, and investment requires caution. The above content represents only the analyst's personal views and does not constitute any operational advice. Please do not treat this report as the sole reference basis. At different times, the analyst's views may change, and updated content will not be separately notified.
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